The new government's first Budget which came on the heels of a stunning electoral mandate did well to stick to the fiscal rectitude path underlined by the Interim Budget by targeting the fiscal deficit at 3.3 per cent of GDP for 2019-20, stated Confederation of Indian Industry (CII) in a press release issued today. The adherence to fiscal consolidation path while providing the necessary boost to consumption, investment and special emphasis on agriculture and rural sector are steps in the right direction to take the economy to US $ 5 trillion mark, stated Mr Kirloskar, President, CII.
The Union Budget 2019-20 provided the right amount of stimulus which would unleash the animal spirits, fire up the economy to take it upto US$5 trillion by 2025, added Mr Kirloskar. CII applauds the government for announcing significant measures for upscaling investments to Rs 100 lakh crore over the 5 years in the infrastructure sector, rejuvenating rural & urban economy, easing stress in the financial sector by addressing liquidity concerns, supporting start-ups in the country etc., which are all expected to debottleneck the economy and create a healthy eco-system for revival of business sentiment.
The Budget did well to bring all companies having turnover upto Rs 400 crores under the 25 per cent corporate tax rate ambit from the erstwhile limit of 250 crores. This is a good beginning and as it is expected to provide a fillip to the corporate sector earnings which could be ploughed back in investments, Mr Kirloskar highlighted.
The Budget announced measures such as strengthening of logistics infrastructure, stepping up efforts in rural housing are likely to provide a significant impetus to investment spending and consumption in the economy, which apart from boosting growth in the near to medium term, will also help generate jobs in the economy.
CII is heartened by the fact that the budget has also announced host of measures to improve the availability of capital for investment purpose. Allowing 100% FDI in insurance intermediaries is a good move as it will encourage global best practices in the India market. This along with the proposal to increase FDI limits in aviation, insurance and media will help improve the availability of foreign capital for these sectors, added Mr Kirloskar. The easing of local sourcing norms for single brand retail is a big positive as well.
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The setting up of Credit Guarantee Enhancement Corporation in 2019-20 with a focus on long-term bonds with specific focus on infrastructure sector carry the potential of further deepening the markets and enabling the infrastructure companies to access long-term funds, Mr Kirloskar stated. Allocation of Rs 70,000 crores for public sector banks recapitalisation is also welcome move and will help banks increase their lending to industry.
CII welcomes the announcement of host of measures which carry the potential of giving boost to rural consumption demand by improve rural connectivity through investment in rural roads, rural housing, zero-budget farming and announcing 100 new clusters for developing skills in rural areas, besides enhancing rural livelihoods and jobs.
The real estate sector which has been witnessing slow growth over the past few years now has been emboldened by measures such as announcing additional deduction of Rs 1.5 lakhs for loan taken for purchase of affordable housing, CII said.
CII applauds the importance which the budget has given to the improvement of economic empowerment of the women by ensuring access to finance enables rural women to take centerstage as contributors to the Indian economy, Mr Kirloskar highlighted.
CII welcomes the ease in tax compliance of personal income tax and the increase in threshold for personal tax for applicability of income tax. In addition, the budget presented an additional option of saving tax emerged in the form of a deduction of Rs 1.5 lakh on the purchase of electric vehicles. The applicability of income tax for incomes above 5 lakh and the increased exemptions for home loan servicing will aid consumption and create demand for affordable housing.
In order to incentivize the manufacture of electric vehicles, the budget sharply reduced the GST from 12% to 5%, which in our view is likely to provide a fillip to the movement towards a greener environment. Among the other indirect tax measures, the budget measure to adopt a new Return format for GST, fully automated GST refund mechanism, usage of single cash & credit ledger are moves which will help further streamline the GST.
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