By Rohit Vaid

New Delhi, July 8 (IANS) Consumption driven growth might become an unintended beneficiary of the government's plans to raise a part of its gross borrowings from external markets.

Presenting the Union Budget 2019-20 last Friday, Finance Minister Nirmala Sitharaman proposed to raise a part of the government's gross borrowings from abroad.

The budget proposal is expected to free-up additional liquidity in the domestic market and lower interest rates. Consequently, it will provide consumers and industry with cheaper access to finance.

According to Edelweiss Securities Lead Economist Madhavi Arora, lower interest rates wil aid consumer driven sectors which have been bogged down due to subdued demand.

Currently, the economy suffers from rural distress, slow pace of private investment and high finance costs. These together have subdued consumer sentiment and further impacted everything from car sales to air passenger traffic. This in turn has impacted production levels and further stalled hiring and wage levels.

The slowdown has impacted the automobile sector the hardest. The off-take data for May showed that domestic passenger car sales were down 26.03 per cent to 147,546 units.

"Issuance of sovereign bonds should ideally free up resources available for production needs at a reduced cost," explained Grant Thornton India Partner Sridhar V.

"Government's move to issue sovereign bonds by itself is an indication of its confidence in the macro fundamentals and could boost economic activity."

However, Kavan Mukhtyar, Partner and Leader - Automotive, PwC India cited the need for further liquidity infusion.

"Cheaper interest rates (as an impact of government's external borrowings) will aid in lowering the ownership cost. However, the need of the hour is to increase the availability of liquidity through NBFCs (non-banking finance companies) and banks," Mukhtyar said.

"Sales might turn positive in August as the liquidity situation is expected to improve."

Off-loading sovereign bonds is a mechanism available to governments for raising cheaper funds from international markets.

A sovereign bond is a debt security issued by a national government and is either denominated in foreign or domestic currency.

"India's sovereign external debt to GDP is among the lowest globally at less than 5 per cent," Sitharaman said in her maiden Budget speech in Parliament.

"The government would start raising a part of its gross borrowing programme in external markets in external currencies. This will also have a beneficial impact on the demand situation for government securities in the domestic market," she added.

This will be a first such bond issuance. In 2013, the government had considered the idea, but never implemented it. At that time, the country was faced with major fiscal and current account deficits.

Instead, the Reserve Bank of India at that time announced a scheme to incentivise foreign currency non-resident (FCNR) deposits, which brought in nearly $34 billion. As a result, most of India's debt is rupee-denominated.

The government's latest move is being seen as prudent in the face of limited options to raise funds as a slowing economy curtails tax revenue, while the borrowing target of a record Rs 7.1 trillion ($104 billion) this fiscal year remains a tough task.

"It will aid the sector to a limited extent. While the interest is low, transmission of cheap capital in the system is important, which takes time," said Rahul Mishra, Principal, A.T. Kearney.

"Also, given the NBFC crisis, the overall availability of capital is very limited and whatever capital is available, it has strong checks and collateral requirement. A combination of low interest, eased out lending norms and better transmission of money will have a positive impact on consumption sectors over a 3-6 month period," he added.

(Rohit Vaid can be contacted at rohit.v@ians.in)

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By Nirbhay Kumar and Subhash Narayan

New Delhi, July 7 (IANS) Armed with transaction details using big data analytics, the government may notify some other classes of people who would be required to file income tax returns in a move to contain evasion.

"People evading tax have to be dealt differently. The 2 per cent TDS (in case of withdrawal of more than Rs 1 crore cash from bank account in a year) is actually for those who are getting away.

"You must have seen in the budget that there are several measures such as those whose electricity bill is more than Rs 1 lakh would need to file return. We may notify some other class of people who would be required to file tax returns," Revenue Secretary Ajay Bhushan Pandey said.

The Union Budget for 2019-20 has proposed to make return filing compulsory for persons who deposit more than Rs 1 crore in a current account in a year, spend more than Rs 2 lakh on foreign travel or have an annual electricity bill of more than Rs 1 lakh.

Tax experts said that the proposed move was positive and it will help widen the taxpayer base, besides curbing evasion. Going forward, the expert said that high hotel bills, massive expenditure on holding a party or purchasing a car could require people to file tax returns.

"The government has already said that those doing high-value transaction would be covered. The next could be high hotel bills, clubs, expenditure on holding a party, purchase of cars and investment above a certain level," said Riaz Thingna, Director, Grant Thornton.

"If someone is buying a car for Rs 5 lakh, it is unlikely that his income would be less than Rs 5 lakh. Today, people are buying Rs 75 lakh car and still not paying taxes. So, I think there are enough opportunities to take up so many different areas."

Though tax compliance has improved in the last few years with a huge rise in number of returns filed, there is enough scope for improvement in a country having a population of about 130 crore.

As per official data, 6.86 crore income tax returns (ITRs) were filed in 2017-18 registering a growth of 23 per cent over the previous year.

The Modi government has been consistently clamping down on generation of black money. It has come out with a number of steps to make India a less-cash economy. Many loopholes of tax evasion and avoidance have been plugged in the last few years while demonetisation has been billed as one of the major steps in this direction.

The government has adopted the principle of higher the earning higher the tax. The budget this week raised surcharge on super rich. Accordingly, those with annual income between Rs 2 to Rs 5 crore would be levied a surcharge of 25 per cent from 15 per cent previously.

For those earning Rs 5 crore or more annually, the surcharge has been increased from 15 per cent to 37 per cent. With this, the effective tax rate will go up to 39 per cent for those in the Rs 2-5 crore income slab. The effective rate for those in Rs 5 crore and above group would go up to 42.74 per cent.

While industry has been miffed over the move, the Revenue Secretary defended it strongly saying the increased tax rate was still lower than those applicable in many countries. He cited the case of US, France and China to drive home the point that India still taxed its super rich at lower rates.

"In India, before the (proposed) increase, for the highest tax bracket the tax rate was 35.8 per cent. In Brazil it is 27.5 per cent. In Canada, it is 33 per cent plus 21 per cent state taxes. It is more than 45 per cent in China, 66 per cent in France and 50 per cent in the US," Pandey said.

On the apprehension that the hike in customs duty on gold would lead to smuggling, the Revenue Secretary said that the enforcement agencies would deal with that problem.

He also said that economic decisions are based on the overall economic environment and not on the basis of whether somebody would misuse the provisions.

"If that argument is considered, even 10 per cent tax would not be there. These arguments are being given by certain people, but the question is how far the argument is valid," he said.

Pandey noted that the stated policy of the government was to reduce non-essential imports.

"We should not be using our forex for non-essential imports. So, the proposal goes along with this policy. The issues related to smuggling or anything will be dealt by the enforcement agencies," the Revenue Secretary said.

(Nirbhay Kumar can be contacted at nirbhay.k@ians.in and Subhash Narayan at subhash.n@ians.in)

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New Delhi, July 7 (IANS) India's exports might become an unwarranted casualty of the government's plans to raise a part of its gross borrowings from external markets, according to analysts.

Presenting the Union Budget 2019-20 on Friday, Finance Minister Nirmala Sitharaman proposed to raise a part of the government's gross borrowings from abroad.

The move, designed to free up additional liquidity in the domestic market, is expected to strengthen the Indian rupee, consequently hurting the country's exports.

"Sovereign bond demand will rise which will appreciate the price of rupee slightly... this might impact our exports by up to 5 per cent in the short-run. Since India's export basket has significant representation of primary and labour intensive products, the elasticity test will work and can be a stabiliser, in the long-run," Export Promotion Council of India Chairman Mohit Singla told IANS.

"Despite the fact that India's sovereign debt is certainly lower than many other nations, the country's credit rating is still quite modest compared to the US, Japan, and Australia, whose debt-to-GDP ratio is almost around 150 per cent but the credit rating is of 'AAA' category," he added.

Currently, rising trade protectionism, along with tensions in the Middle East, have hampered merchandise exports and widened India's trade deficit.

A widening trade deficit at this time will come as a double whammy for the economy, which already faces a slowdown in internal consumption.

Latest official figures show India's merchandise exports rose 3.93 per cent in May on a year-on-year basis to $29.99 billion, from $28.86 billion reported for the corresponding month of last year.

However, the trade deficit during May widened to $15.36 billion as against the deficit of $14.62 billion in May 2018.

Offloading sovereign bonds is a mechanism available to governments for raising cheaper funds from international markets.

"India's sovereign external debt to GDP is among the lowest globally at less than 5 per cent," Sitharaman said in her maiden Budget speech in Parliament on Friday.

"The government would start raising a part of its gross borrowing programme in external markets in external currencies. This will also have beneficial impact on demand situation for the government securities in domestic market," she added.

A sovereign bond is a debt security issued by a national government. Sovereign bonds can be denominated in a foreign currency or the government's domestic currency.

It will be a maiden such bond issuance. In 2013, the government had considered the idea, but never implemented it. At that time, the country was faced with major fiscal and current account deficits.

Instead, the Reserve Bank of India (RBI) at that time announced a scheme to incentivise foreign currency non-resident (FCNR) deposits, which brought in nearly $34 billion. As a result, most of India's debt is rupee-denominated.

The government's latest move is being seen as prudent in the face of limited options to raise funds as a slowing economy curtails tax revenue, while the borrowing target of a record Rs 7.1 trillion ($104 billion) this fiscal year remains a tough task.

According to Sajal Gupta, Head, Forex and Rates, Edelweiss Securities, "the Budget aiming for a lower interest rate regime and foreign investment being opened in various forms looks to make rupee stronger in the coming times."

"What needs to be seen is RBI's intervention to stem it," he added.

(Rohit Vaid can be contacted at rohit.v@ians.in)

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By Anjana Das and Subhash Narayan

New Delhi, July 7 (IANS) In an effort to lower the expenditure, Finance Ministry is considering merger and discontinuation of a few more Centrally Sponsored Schemes (CSS), priortise expenditure to rationalise expenses and has allocated Rs 20,000 crore for some new schemes in health, housing, drinking water, a top official said.

"We have to balance between revenues, fiscal deficit and expenditure priorities. We have priortised 32 ministries and we have realigned the same expenditure level with little bit of increase. Together with these, we have allocated Rs 20,000 crore for new schemes -- health, drinking water, housing.

"We will rationalise, not downsize. We have so many CSS. We may little bit compress there, merge them or some may be discontinued. Some realignment will be made in the small schemes where convergence is needed," Girish Chandra Murmu, Expenditure Secretary told IANS in an interview.

He did not name the CSS where such rationalisation could take place.

Murmu also said the government is hoping to save on interest costs from the proposed sovereign bonds.

"Rs 6 lakh crores are interest expenditure, we have to see how to rationalise those things. So that we can realign. Sovereign bond will help in doing this as internationally capital is low cost and the real cost of money is very high in India. But the Sovereign bond amount is not Budgeted this year. It will be a bonus," Expenditure Secretary said.

In the Budget, Finance Minister Nirmala Sitharaman announced government would go for Sovereign bond in foreign currency to meet part of borrowing.

DoE does not see any major upside to the expenses at least till the Revised Estimates (RE) stage in October except few items.

"All major expenditures both on capital and revenue side have been taken care and adequately provided. On PM Kisan, we have already provided Rs 75,000 crore and we will evaluate again at the RE stage in October-November.

"There is an estimation of Rs 87,000 crore but we have adequate provision to see through that RE stage. I don't see any pressure. We will augment in PM Kisan if required. It is not a big amount and there may be some expenditure on labour and employment side due to extension of EPFO scheme contribution of 12 per cent by employer. It will cost Rs 10,000-Rs 12,000 crore a year.

"Right now Rs 5,000 crore is already there and at RE stage we will evaluate more requirements. We may scale up little bit in water supply scheme," Murmu said.

The Expenditure Secretary ruled out any downward revision on revenue expenses.

"Revenue expenditure cutting down is impossible at current level because they are all committed liabilities. Revenue expenditure has defence, interest payment, pensions, subsidy. There is no scope for cutting down. The central sector schemes and other such schemes are also revenue expenditure, so they can not be cut as they are welfare schemes.

Total Expenditure through Budget is Rs 27.84 lakh crore in 2019-20.

(Anjana das can be contacted at anjana.d@ians.in and Subhash Narayan at subhash.n@ians.in)

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By Anjana Das and Subhash Narayan

New Delhi, July 7 (IANS) Government may seek more time from market regulator SEBI for public sector enterprises and state-owned banks to comply with changes in the minimum public shareholding norms for listed companies proposed in the budget, Finance Secretary Subhash Chandra Garg said.

The Budget 2019-20 presented by Finance Minister Nirmala Sitharaman on Friday proposed raising the current threshold of 25 per cent minimum public shareholding in the listed companies to 35 per cent.

The announcement, along with few other budget proposals, did not go down too well with the markets as benchmark Sensex closed 394.67 points, or 0.99 per cent, lower at 39,513.39, while the 50-share NSE Nifty falling 135.60 points, or 1.14 per cent, to settle at 11,811.15.

"It was more of a knee jerk reaction from the market. Probably someone thought this is a decision taken. This is not a decision at this stage. The FM has said that she is asking SEBI to examine minimum public shareholding norms as this seems to be right time to do so. It needs examination so consultation process will start. At the end of that process, if SEBI recommends changes, a roadmap will be finalised," Garg told IANS in a post-Budget interview.

He, however, said that the norms, when finalised, would be universally applicable for all companies -- banks - non banks, PSUs - non PSUs. But, the government can exempt a few categories from complying with higher public shareholding norm as has been done in past.

"Government has the authority to exempt some companies. In the past too we have given PSUs and banks more time to comply with it," Garg said.

What this would mean is that when timelines are decided for higher public shareholding, certain category of government companies may be offered more time to plan their share dilution. This is also necessary as few companies are yet to even comply with minimum 25 per cent public shareholding norm in operation now.

The changes in listing norms could also lead to the delisting of many MNC firms. Several MNCs and IT companies have high promoter shareholding. There are 1,174 listed companies where promoters holding are over 65 per cent stake.

(Anjana Das can be contacted at anjana.d@ians.in and Subhash Narayan at subhash.n@ians.in)

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Fiscal deficit for FY20 is revised lower by 10bps to 3.3 per cent vs. earlier estimate of 3.4 per cent, significantly below our estimate of 3.8 per cent-4.3 per cent. The government has increased the divestment target by Rs 150 billion from Rs 900 billion to Rs 1,050 billion, marking a 31.3 per cent increase YoY.

Total expenditure has seen increase of 13.4 per cent YoY, while revenue expenditure by 14.3 per cent YoY and capital expenditure by 6.9 per cent YoY. Revenue expenditure has remained flattish from interim estimates.

Fiscal deficit estimate for FY20 is also maintained at 3.3 per cent of the GDP. Nominal GDP has been estimated to increase by 0.5 per cent to 11 per cent YoY for FY20 from interim estimates. However, looking at the current slowdown in the economy, GDP estimates look a little stretched and we sense the nominal GDP to grow at about 10 per cent-10.5 per cent for FY20.

Slippages in GST collections in FY19 coupled with slowdown in economic growth have led to reduction in GST estimates for FY20 by Rs 979 billion from the interim estimates. The government has, in the past, resorted to deferment of capital expenditure in order to contain fiscal deficit. But it is not expected to curb capital expenditure now citing emphasis on the need for infrastructure spending for reinvigorating slowing economic growth. In the light of the above, we expect that fiscal deficit might slip by 20 to 40bps but with a remote possibility of a large slippage as expected previously.

Capital expenditure for FY20 is pegged at Rs 3,386 billion, marking an increase of 6.9 per cent YoY. Though the capital expenditure has been increasing in absolute terms, it has been sticky at 1.5-1.6 per cent of the GDP.

Rs 941 billion has been allocated to railways marking an increase of 9.6 per cent YoY. Rs 100 lakh crore has been allocated for development of rural and urban infrastructure, including highways and roadways over the next five years.

The budgeted Revenue Expenditure for FY20 shows an increase of 14.3 per cent YoY amounting to Rs 24,478 billion from FY20. Agriculture, rural development, infrastructure and FDI investments have been the key focus for FY20, laying the roadmap for the next five years.

The government has strongly laid emphasis on the need of PPPs for better materialisation in the infrastructure sector. FY20 has also seen an increase of Rs 650 billion in agri and allied activities in FY20. Subsidies have seen an increase of Rs 3,50,477cr from last year.

Rationalisation of KYC norms for FPI investments, raising limits for investments in specific sectors, merging NRI investment routes with FPI investments as well as opening avenues for 100 per cent FDI investments have been taken up in the budget. Deepening of the bond markets, including corporate bonds is in the pipeline for better mobilisation of funds especially focusing on investment in infrastructure.

For FY20, the government has estimated a conservative growth of 11.3 per cent YoY amounting to Rs 13,350 billion in gross direct tax revenue collections by lowering the growth for personal income taxes by 9.6 per cent from interim estimates.

The government has given growth rate of 14.2 per cent YoY for corporate taxes. Extending the bracket of corporate taxes at 25 per cent for companies having turnover from Rs 250 crore to Rs 400 crore is a major tax rationalisation step which can have impact on collection of corporate taxes along with easing angel tax provisions.

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New Delhi, July 6 (IANS) Revenue mobilisation is the single biggest impediment in the investment and consumption oriented budget announced on Friday.

Reliance Securities' prognosis is that the GST collections have been below estimate for FY20 at Rs 1,050 billion against government's expectation of Rs 1,150 billion per month. The GST Council also undertook rationalisation of higher tax rates (28 per cent) bracket by bringing these down for 200 commodities since the inception of the GST.

Consequently, the government has revised its estimate downwards for FY20 to Rs 6,633 billion from Rs 7,612 billion in the interim estimates, citing a shortfall of Rs 980 billion.

Other measures relating to the GST on electric vehicles from 12 per cent to 5 per cent shall impact the collections. As per our expectations, the government also announced simpler compliance norms for smaller tax payers with a view to increase compliance thereby increasing GST collections.

Consequently, for FY20 the government has projected a growth rate of 4 per cent in GST collections YoY. However, actual GST collections for FY19 look at an aggressive growth rate of 14.1 per cent.

In our view, there could be a slippage of Rs 200-300 billion, in addition to revised drawdown from the government in GST collections given the average collection rate in the current year of Rs 1,050 billion per month against the required Rs 1,150 billion.

The government's estimate of revenue from custom duties has increased by 20 per cent YoY on account of increase in customs duties on non-essential items as well as other strategic commodities to protect the interest of the Indian industry.

In our view, the estimation is on the higher side since we expect imports to come down on account of the government's recent steps to curb the current account deficit. Also, concerns of slowing global trade are expected to have an impact on the India's trade flow. The budgeted revenue from excise duties for FY20 has increased by Rs 400 billion, marking an increase of 15.6 per cent YoY.

Consequently, total net tax revenue is estimated to increase by 13.5 per cent YoY. Actual net tax receipts for FY19 amounted to Rs 13,170 billion, implying a shortfall of Rs1,675 billion from the estimates.

Looking at the actual figure, net tax receipts for FY20 have been budgeted at Rs 16,496 billion marking an increase of 25.3 per cent YoY on actual basis. This print looks aggressive in the context of efficiency in collection of taxes. A total shortfall of Rs 1,000-1,500 billion can impact the fiscal deficit by 20-40bps.

Non-tax revenue is estimated to increase by 27.7 per cent YoY to Rs 3,132 billion owing to increase in the RBI dividend and other interest receipts. The government achieved its non-tax revenue for FY19.

The government has shown confidence in achieving the expected to divestment target of Rs 1,050 billion for FY20. Strategic divestments such as Air India are proposed to be taken in the current year. Since the government exceeded the target in FY19, we feel it will be able to achieve it for FY20 as well.

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New Delhi, July 6 (IANS) The Finance Ministry has sent out informative guide on various indirect tax proposals in the Union Budget to senior field officers for implementation.

In a letter to Principal Chief Commissioner, Chief Commissioner and Principal Commissioner, the revenue department has advised them to guide trade and businesses and educate them on change in custom duties on various items.

It has also asked them to give their views and feedback on various proposals.

"I may request that all possible efforts be made to guide the taxpayers by holding interactive sessions/seminars for their (trade and businesses) benefits," G.D. Lohani, Joint Secretary (Tax Research Unit-I) wrote soon after the Budget presentation on July 5.

Presenting her maiden Budget, Union Finance Minister Nirmala Sitharaman proposed to raise duties on many items other than diesel, petrol and gold. The new rate in most cases would kick in immediately.

"In order to provide domestic industry a level playing field, basic customs duty is being increased on items such as cashew kernels, PVC, Vinyl flooring, tiles, metalfittings, mountings for furniture, auto parts, certain kinds of synthetic rubbers, marble slabs, optical fibre cable, CCTV camera, IP camera, digital and network video recorders etc," Sitharaman said on Friday.

Excise duty on tobacco products and crude petroleum has also been imposed. The Budget imposed 10 per cent import duty on newsprint and 5 per cent import duty on printed books.

Custom duty on gold and other precious metals has been raised from 10 per cent to 12.5 per cent.

In a bid to promote local manufacturing, the Finance Minister proposed a cut in customs duty on certain raw materials and capital goods.

Apart from change in the duties, the Budget has made enabling provisions to create national appellate Authority for Advance Rulings to hear appeals against conflicting advance rulings given by the Appellate Authorities of two or more states.

The Budget also seeks to amend Central Goods and Services Tax Act, 2017 for facilitating trade and improving compliance as per the decisions of the GST Council. These changes will come into effect from a notified date.

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New Delhi, July 6 (IANS) The Union Budget maintained the governments stance of fiscal prudence and continued focus on infrastructure creation.

The budget, presented on Friday, has provided impetus to the banking sector with recapitalization of PSU banks to the tune of Rs 700 billion which was higher than expectations and also some short term measures to mitigate the stress on NBFCs.

While there were positives for the financial services sector, the budget is unlikely to provide short term boost to accelerate the GDP growth as the budget continues to stick to long-term strategic objectives.

Reliance Securities in its assessment said: "Certain measures like tax on buyback, incremental taxation on super rich and proposals to bring down promoter holding will have varied impact."

While the revenue targets are aggressive and curtailing expenditure will be a challenge but fiscal deficit is likely to remain manageable non tax revenues have been raised.

The key takeaways from the Union Budget 2019 are as follows:

Impetus on financial services and infrastructure creation: The re capitalisation of Rs 700 billion significantly higher than expectations which will help the PSU banking sector to increase participation and it is a significant long-term positive. Also significant measures of additional interest rate rebate for affordable housing is another positive. Infrastructure sector has continued to see decent growth with focus on roads. Housing for all is another key focus area for the government with significant increase in targets. Both these will be benefit the cement companies. Infrastructure companies focused on road projects will continue to perform well.

No major announcements for consumer sector; ITC scrapes through: There were no major announcements in the Union Budget for stoking consumption growth after the benefits announced in the interim budget. Excise duty was brought back on cigarettes but it is insignificant at less than 0.2 per cent of current tax incidence and manageable for the company. Increase in import on gold is a marginal negative for Titan but the company should be able to manage the impact. Automobile sector saw reduction in taxes on electric vehicles from 12.5 per cent to 5 per cent which is a long-term positive.

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New Delhi, July 6 (IANS) The Union Budget, presented by Finance Minister Nirmala Sitharaman on Friday, has laid down a roadmap for the National Education Policy (NEP), which is currently in its draft form. Prepared by a panel headed by eminent space scientist K Kasturirangan, the NEP seeks to address the challenges of access, equity, quality, affordability, and accountability faced by the current education system.

In her budget speech, the Finance Minister assured that the government will bring in a new National Education Policy to transform India's higher education system to one of the global best education systems. The new policy proposes major changes in both school and higher education among others, better governance systems and brings greater focus on research and innovation, she said.

The draft Policy provides for reforms at all levels of education from school to higher education. It seeks to increase the focus on early childhood care, reform the current exam system, strengthen teacher training, and restructure the education regulatory framework. It also seeks to set up a National Education Commission, increase public investment in education, strengthen the use of technology and increase focus on vocational and adult education, among others.

One of the recommendations made by the draft NEP is to constitute a National Research Fund (NRF) to bolster research in the country. The recommendation found a mention in the Finance minister's speech as she announced setting up of the NRF to fund, coordinate and promote research in the country.

"The NRF will ensure that the overall research eco-system in the country is strengthened with focus on identified thrust areas relevant to our national priorities and towards basic science without duplication of effort and expenditure. The funds available with all Ministries will be integrated in NRF and would be adequately supplemented with additional funds," Sitharaman said in her speech.

The draft policy has recommended setting up of NRF "through an Act of Parliament, as an autonomous body of the Government of India, to fund, mentor, incentivize, and build capacity for quality research across the country in all disciplines, primarily at universities and colleges, both public and private. Appropriate infrastructure and a trained staff will be provided to enable it to fulfil its mission".

According to the draft policy, the NRF will consist of four major divisions -- Sciences; Technology; Social Sciences; and Arts and Humanities - with the provision to add additional divisions. In addition to directly funding the outstanding research proposals, the NRF is recommended to "help seed centres of research in select disciplines at various universities, through providing institutional funding, bringing in research mentors as well as postdoctoral and doctoral students to grow an ecosystem for research at institutions where it currently does not exist or is limited".

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New Delhi, July 5 (IANS) Finance Minister Nirmala Sitharaman said on Friday that foreign portfolio investors (FPIs) will be permitted to subscribe to listed debt securities issued by the Real Estate Investment Trusts (REITs) and the Infrastructure Investment Trust (InvITs).

Presenting her maiden Union Budget, Sitharaman said that an important determinant of attracting cross-border investments is availability of investible stock to the foreign portfolio investors (FPIs).

"Encouragement to foreign institutional investors to subscribe in REITs and InvITs will help in transforming the commercial realty market which is at present coming out of the liquidity crunch," said Sakshi Katiyal, Chief Executive Officer at Home & Soul.

"This issue assumes greater significance in view of the gradual shift from stock targeted investments towards passive investment whereby funds track global indices, composition of which depends upon available floating stock," Sitharaman said.

"Accordingly, I propose to increase the statutory limit for FPI investment in a company from 24 per cent to sectoral foreign investment limit with option given to the concerned corporates to limit it to a lower threshold. FPIs will be permitted to subscribe to listed debt securities issued by ReITs and InvITs," she said.

New and innovative financial instruments have been launched in the last five years like InvITs, REITs as well as models like toll-operate-transfer (ToT) as part of the brownfield asset monetisation strategy for augmenting infrastructure investment, she said.

"India has had reasonable success in brownfield asset monetisation and several InvITs and one REIT transaction have already been completed. Additionally, the National Highway Authority of India (NHAI) carried out one ToT transaction as well. The cumulative resources garnered through these instruments and model exceed Rs 24,000 crore," Sitharaman said in her Budget speech.

Commenting on the announcement, Chintan Patel, Partner, Deal Advisory, and Head, Building, Construction & Real Estate, KPMG India, said that allowance of FPIs to subscribe to listed debt securities under REITs and InvITs mechanisms will further boost foreign investor participation.

Surendra Hiranandani, Director, House of Hiranandani, said that the decision to allow foreign institutional investors to subscribe to REITS and INVITs is a welcome move.

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New Delhi, July 5 (IANS) Contrary to the equity markets, the Indian rupee gained against the US dollar on Friday after the presentation of the Union Budget as fiscal deficit and gross borrowings were in line with pre-budget expectations.

The rupee ended with gains at Rs 68.42 per dollar from its previous close of Rs 68.50.

"The Indian rupee closed on a firm note against the dollar as it strengthened sharply from the day's lows after the Finance Minister's budget presentation. Bond yields had also fallen, as the government signalled that it is seeking external borrowings, especially as global interest rates remain relatively low," said Anand James, Chief Market Strategist, Geojit Financial Services.

"US Fed Chairman Jerome Powell's upcoming semi annual testimony should keep the rupee tentative against the US dollar next week," James added.

R.K. Gurumurthy, Head of Treasury, Lakshmi Vilas Bank, said that a positive for the Indian rupee is that fiscal deficit and gross borrowings are in line with pre-budget expectations.

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New Delhi, July 5 (IANS) Retail investors will soon get a chance to invest in government securities (G-Secs) and treasury bills with the Union Budget proposing a new mechanism to attract individual investors to the bond market.

While presenting the Budget in the Parliament on Friday, Finance Minister Nirmala Sitharaman announced that the government will take necessary steps to bring retail investors to the bond market in consultation with the RBI and market regulator SEBI.

"For this purpose, inter-operability of RBI depositories and SEBI depositories would be necessary to bring about seamless transfer of treasury bills and government securities between the RBI and depository ledgers," the Finance Minister said.

This would make it easier for retail investors to invest in treasuries and government bonds.

"Efforts made by the Reserve Bank will need to be supplemented with further institutional development using the stock exchanges," Sitharaman said, indicating the government's intent to initiate the process soon.

Presently, buying and selling of G-Secs and treasury bills is a cumbersome process for retail investors as their purchases do not get directly deposited into demat accounts, which is the case for equity sale and purchase. Government securities purchases are reflected in the Securities General Ledger account and getting it transferred from there to demat account is a cumbersome process.

Last month, the RBI asked the stock exchanges to act as facilitators or aggregators of bids of their stockbrokers or other retail participants, when it met for the second time to decide on the monetary policy in financial year 2019-2020.

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New Delhi, July 5 (IANS) With an aim to reduce imports along with spurring domestic production, Finance Minister Nirmala Sitharaman has proposed to raise custom duty on over 70 items in the full Budget 2019-20.

Traditionally, the governments adjust custom duties to protect domestic industry and sometimes to allow cheaper raw material imports to spur manufacturing sector.

In India's case, it is more a case of customs duty adjustment "to provide level playing field to domestic industry".

"On the Customs side, my proposals are driven with the objectives of securing our borders, achieving higher domestic value addition through make in India, reducing import dependence, protection to MSME sector, promoting clean energy, curbing non-essential imports, and correcting inversions," Sitharaman said in her maiden Budget speech on Friday.

"Make in India is a cherished goal. In order to provide domestic industry a level playing field, basic customs duty is being increased on items such as cashew kernels, PVC, vinyl flooring, tiles, metal fittings, mountings for furniture, auto parts, certain kinds of synthetic rubbers, marble slabs, optical fibre cables, CCTV cameras, IP cameras, digital and network video recorders etc. Also, exemptions from custom duty on certain electronic items which are now being manufactured in India are being withdrawn.

"Further, end-use based exemptions on palm stearin, fatty oils, and exemptions to various kinds of papers are also being withdrawn. To encourage domestic publishing and printing industry, 5 per cent custom duty is being imposed on imported books."

Abhishek Jain, Tax Partner, EY India, said: "Customs duty increase on various products imported by the automotive industry should help foster Make in India for these products but may adversely impact the already sluggish auto market; increased rate of duty for import of completely built cars should as well help boost manufacturing of these cars in India..."

"...increased BCD rate on various goods for electronic industry like indoor and outdoor units of split air conditioner systems, etc would as well incentivize domestic manufacturing of these goods; increase in road and infrastructure cess on import of petrol and diesel would further increase costs of these goods and this having a severer impact for most businesses to which credit of this is also not available..."

"...increase in basic customs duty on import of optical fibres and cables should also help foster the domestic manufacturing industry of these products but may have an adverse impact for the telecommunication sector; increase in basic customs duty rate for various electronic goods like loudspeakers, digital video recorders, etc should encourage domestic manufacturing of these goods; retrospective exemption for service tax on liquor license would aid in reducing costs for liquor industry, as service tax was generally a cost for these businesses," Jain said.

Rashmi Deshpande, Partner, Khaitan & Co said: "The budget, from an indirect tax perspective, provides a positive reinforcement to the 'Make in India' initiative with customs exemptions being withdrawn on several imported electronic products, palm stearin and fatty oils for which there is a developing Indian market."

"This coupled with the reduced BCD rates on capital goods used in the electronic industry will set pace for increased manufacturing in India.

"With an eye to boost clean transportation, the BCD rates on electronic vehicles has been slashed. This ties in with the larger initiative of the government to boost cleaner fuels."

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New Delhi, July 5 (IANS) The government on Friday lowered the fiscal deficit target for 2019-20 to 3.3 per cent of the gross domestic product in the Union Budget.

The government has also laid out an aggressive disinvestment programme to augment non-tax revenue collections. The net receipts in indirect taxes is Rs 25,000 crore while the direct taxes additional revenue would be up to Rs 8,000 crore, Revenue Secretary A.B. Pandey said at a media conference.

He further added that the increase in surcharge on high networth individuals from Rs 2 crore to Rs 5 crores will yield Rs 12,000 crore to the government.

"Fiscal deficit is lowered to 3.3 per cent (from earlier 3.4 per cent)," Finance Minister Nirmala Sitharaman said at the end of her Budget speech keeping the suspense till the end.

"FY21 and FY 22 fiscal deficit targets retained at 3 per cent," said at the media interaction. Fiscal deficit touched 52 per cent of the budget estimate for the full year in the first two months of 2019-20.

The FY20 gross tax revenue target is at Rs 24.6 lakh crore while net tax revenue target is Rs 16.49 lakh crore. The FY20 non-tax revenue target is at Rs 3.13 lakh crore and net short term borrowing target is Rs 25,000 crore.

The Centre has set FY20 GST collection target at Rs 6.6 lakh crore. In the last financial year, GST collections by the Centre missed the budgeted target by Rs 1 lakh crore.

Sitharaman pegged the Goods & Services Tax (GST) collection in the Union Budget at Rs 6.63 lakh crore for FY20, up from last year's revised collections of Rs 6.43 lakh crore.

The total mop-up from the indirect taxes was pegged at over Rs 7.61 lakh crore for 2019-20 in the interim budget presented in February.

The interim budget for 2019-20, also presented by the Modi government in February, had forecast a fiscal deficit of 3.4 per cent of GDP in 2019-20 while revising the fiscal deficit upwards for 2018-19 to 3.4 per cent from 3.3 per cent.

The slowdown in growth has adversely impacted tax collections making it even more difficult for the government to find funds for its social sector schemes and capital expenditure.

While direct tax collections were 6 per cent lower than the revised estimates, indirect tax collections were down 10 per cent than even the revised lower tax projections.

However, there were fears that an increase in the fiscal deficit and subsequently government borrowings is likely to push up interest rates thus raising fears of 'crowding out' private investment at a time when the sector is reluctant to invest.

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New Delhi, July 5 (IANS) The first Budget of Modi 2.0 government has laid huge emphasis on investment and consumption to realise the dream of 'New India' making it a $ 5 trillion economy in the next few years, but mobilising funds remains a challenge for it in the wake of global headwinds and domestic slowdown.

"Our economy was at approximately $ 1.85 trillion when we formed the government in 2014. Within 5 years it has reached $ 2.7 trillion. It is well within our capacity to reach the $ 5 trillion target in the next few years", Finance Minister Nirmala Sitharaman said in her maiden Budget speech.

The Budget relies heavily on private investment to build infrastructure that would cost Rs 100 lakh crore over the next five years, rev up manufacturing, boost exports and create more jobs. It has proposed to further open various sectors for FDI and relax rules for other foreign and NRI investments into the country.

"There are several commendable measures on the capital market front to attract the FPIs and also further easing of the FDI norms in insurance intermediation and relaxing the local sourcing requirements in single brand retail to cheer the private sector. The outcome will, however, depend on how the private sector reacts to the proposals and realisation of the investments," said Ranen Banerjee, Leader (Public Finance and Economics), PwC India.

The Budget has proposed to mobilise funds by offering to divest stake in more public sector companies and issuing sovereign bonds overseas. For finding ways to provide long-term financing to infrastructure sector, the Finance Minister has proposed an expert panel that will give suggestions.

Given the commitment to stick to fiscal deficit (as a percentage of GDP) target, 10 basis point lower than 3.4 per cent announced in the Interim Budget, the task to arrange funds seems even more challenging.

The government hopes a massive fund influx from the Reserve Bank of India as dividend in 2019-20. Senior government official have said that around Rs 90,000 crore is expected to come from the central bank in this fiscal. But given the massive fund needs, this may not be enough. Lower than expected GST collection has already been a big disappointment in FY19.

The Budget has, however, sought to fire all engines to revive private investment and boost consumption offering a slew of tax concessions to companies, raise public spending for infrastructure and ensure credit flow for business expansion.

In line with prescriptions given in the Economic Survey, the Minister stressed private sector-led investment, jobs, exports and consumption.

Besides proposing to relax various rules for foreign and NRI investment into the country, Sitharaman came out with out-of-box idea to create a 'Social Stock Exchange' for listing social enterprises and voluntary organisations. The move is expected to help social firms raise funds and promote governance.

The Budget has proposed opening FDI floodgates in aviation, insurance intermediary, animation and media. India's FDI inflows in 2018-19 remained strong at $ 64.375 billion marking a 6% growth over the previous year.

Sitharaman said that FDI inflows into India have remained robust despite global headwinds.

Further, the Union Budget has attempted to keep consumption level robust by taking much-needed step to tackle crisis in the shadow banking sector. The Budget 2019-20 proposed that government will give one-time six-month credit guarantee for the purchase of assets of high rated NBFCs up to 1 lakh crore. The move is set to ensure flow of capital for well-performing NBFCs.

In order to boost credit, the Finance Minister proposed to provide Rs 70,000 crore to public sector banks.

In a major tax relief for companies with annual turnover of up to Rs 400 crore, Sitharaman proposed to lower corporate tax for them to 25 per cent from 30 per cent now. Currently, the lower corporate tax is paid by companies with annual revenue of Rs 250 crore.

Further, the start-ups and their investors who file requisite declarations and provide information in their returns will not be subjected to any kind of scrutiny in respect of valuations of share premiums.

The housing sector, one of the key job creators, also stands to gain from the Budget. Joint development and concession mechanisms would be used for public infrastructure and affordable housing on land parcels held by the Central Government and CPSEs.

Additional deduction up to Rs 1.5 lakhs for interest paid on loans borrowed up to March 31, 2020 for purchase of house valued up to Rs 45 lakh. This will result in overall benefit of around Rs 7 lakh over loan period of 15 years," the Minister said.

The Budget has proposed to upgrade 125,000 km of rural roads and 'Housing for All' under PMGSY-III in 5 years with an outlay of more than 80,000 crore providing impetus to the rural economy.

"The focus in the Budget on the rural economy is important because more than 65% of Indians reside in the countryside," said Ajay S. Shriram, Chairman & Senior Managing Director, DCM Shriram and formerly CII President.

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New Delhi, July 5 (IANS) Finance Minister Nirmala Sitharaman on Friday announced that public sector banks will be provided with a recapitalisation of Rs 70,000 crore to support lendings.

"PSU bank recapitalisation should make bank lending easy. Rs 70,000 crore PSU bank recap addresses the issue of liquidity and interest rate transmission and makes bank lending easy," Sitharaman said at the post-Budget media interaction.

Banks were citing lack of growth capital as the reasons behind not passing the RBI repo rate cuts. While tabling the Budget, Sitharaman said Indian banking sector saw Rs 1 lakh crore of NPA resolution and recovery of Rs four lakh crore through the IBC mechanism in the last four years.

She also said six PSU banks have already been brought out of the Prompt Corrective Action (PCA) framework. In the past three years, PSBs have been recapitalised to the extent of Rs 2.87 lakh crore, with infusion of Rs 2.20 lakh crore by the government and mobilisation of over Rs 66,000 crore by PSBs themselves.

Officials said the capital will be used for growth. The government will initiate steps to empower account holders to remedy the current situation in which they do not have control over deposit of cash by others in their accounts.

Reforms will also be undertaken to strengthen governance in public sector banks. Financial gains from cleaning of the banking system are now amply visible. The NPAs of commercial banks have reduced by over Rs 1 lakh crore over the last year, record recovery of over Rs four lakh crore due to IBC and other measures has been effected over the last four years, provision coverage ratio is now at its highest in seven years, and domestic credit growth has risen to 13.8 per cent, Sitharaman said.

She further informed that, the government has smoothly carried out consolidation, reducing the number of PSU banks by eight. At the same time, as many as six PSU banks have been enabled to come out of Prompt Corrective Action framework.

The Finance Minister informed that Non-Banking Financial Companies (NBFCs) are playing an extremely important role in sustaining consumption demand as well as capital formation in small and medium industrial segment. NBFCs that are fundamentally sound should continue to get funding from banks and mutual funds without being unduly risk averse.

For purchase of high-rated pooled assets of financially sound NBFCs, amounting to a total of Rs one lakh crore during the current financial year, government will provide one-time six months' partial credit guarantee to PSU banks for first loss of up to 10 per cent.

Further, Reserve Bank of India (RBI) is the regulator for NBFCs. However, RBI has limited regulatory authority over NBFCs. Appropriate proposals for strengthening the regulatory authority of RBI over NBFCs are being placed in the Finance Bill.

"NBFC credits are critical. Government has comprehensively thought solutions for the NBFC sector," she added.

She said that NBFCs which do public placement of debt have to maintain a Debenture Redemption Reserve (DRR) and in addition, a special reserve as required by RBI, has also to be maintained.

To allow NBFCs to raise funds in public issues, the requirement of creating a DRR, which is currently applicable for only public issues as private placements are exempt, will be done away with.

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New Delhi, July 5 (IANS) The Budget 2019-20 has not accounted for spectrum auction in the non-tax revenue category as Finance Secretary Subahsh Chandra Garg said the Department of Telecom are still working on the modalities of the auction.

"They (the Department of Telecom) said they were still working on the auction modalities. SO if they finalise, we will see later," Garg said at the post-Budget media interaction.

The auction, Communications Minister Ravi Shankar Prasad had said after taking over in June, could take place in this calendar year.

The DoT's inter-ministerial panel has decided to refer back the proposals back to the regulator TRAI, seeking the possibility of a price revision as the industry says the base prices of spectrum for 5G services are very high. This has put uncertainty in the entire spectrum auction schedule.

At the given base prices, the auction, if all the over 8000 mhz of spectrum was sold, could have fetched about RS 4.5 lakh crore to the government.

For the Finance Ministry, the uncertainty is not good news as this would cut the non tax revenues for them. For FY20, the non-tax revenue target is Rs 3.13 lakh crore.

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New Delhi, July 5 (IANS) In a bid to lower domestic interest rates, Finance Minister Nirmala Sitharaman has proposed raising a part of the government's gross borrowings from abroad.

Traditionally, government raises cheaper funds from international markets by offloading sovereign bonds.

The move will free up additional liquidity in the domestic market. However, it is expected to impact the Indian rupee and G-sec Bond yields.

"India's sovereign external debt to GDP is among the lowest globally at less than 5 per cent," Sitharaman said in her maiden Budget speech in Parliament on Friday.

"The government would start raising a part of its gross borrowing programme in external markets in external currencies. This will also have beneficial impact on demand situation for the government securities in domestic market."

Finance Secretary Subhash Chandra Garg at the post-Budget media conference said: "We will be starting the sovereign bond preparations soon. We have not decided the exact amount, but we will be starting the process soon, certainly in this financial year."

A sovereign bond is a debt security issued by a national government. Sovereign bonds can be denominated in a foreign currency or the government's domestic currency.

It will be a maiden such bond issuance. In 2013, the government had considered the idea, but never implemented it. The country that time faced wide fiscal and current account deficits.

Instead, the Reserve Bank of India announced a scheme to incentivise foreign currency non-resident (FCNR) deposits, which brought in nearly $34 billion.

Consequently, most of India's debt is rupee-denominated.

The share of government debt in total external debt is minuscule. India's sovereign external debt stood at $103.8 billion at end-March 2019, showed the latest data released by the Reserve Bank of India in June.

The share of government debt in total external debt stood at 19 per cent at end-March 2019 from global financial agencies, the data showed.

Besides, the move is prudent in the face of limited options to raise funds as a slowing economy curtails tax revenue, while the borrowing target of a record Rs 7.1 trillion ($104 billion) this fiscal year remains a tough task.

On Thursday chief economic advsior Krishnamurthy Subramanian had said government should look at raising capital from low interest markets like Japan and European countries to lower the fiscal deficit.

India Inc welcomed the announcement. Industry body CII Director General Chandrajit Banerjee said: "Government's intent to raise a greater part of its borrowing requirements internationally, will have a positive effect on government yields with a benign impact on interest rates."

"It will also reduce the crowding out the effect of government borrowing, making more capital available for private investments."

Lakshmi Vilas Bank Head of Treasury R.K. Gurumurthy said: "Fiscal deficit and gross borrowings are in line with pre-Budget expectations. Additionally, some part of borrowings within the gross borrowings is estimated to be raised overseas. So the pressure on domestic liquidity is that much less."

The Indian rupee can gain a bit on the back of this development. However, most of today's reactions could reverse as timing is the key, he added.

"Bond yields were expected to touch 6.50 per cent and today's low was close to that. Bias remains for softer yields this quarter," Gurumurthy said.

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New Delhi, July 5 (IANS) The Modi government has allocated Rs 3,01,694 crore for subsidy on three major components -- food, fertiliser and petroleum -- in Budget 2019-20, which is 13.32 per cent higher than the Budget (Revised) 2018-19.

Rs 1,84,220 crore has been allocated for food subsidy this financial year as against Rs 1,71,298 crore in 2018-19.

The food subsidy covers assistance to state agencies under the National Food Security Act.

Finance Minister Nirmala Sitharaman, who presented Budget 2019-20, has earmarked Rs 79,996 crore for fertiliser subsidy this year. Last year, it was Rs 70,086 crore.

The subsidy applies to the payment of indigenous urea, indigenous P and K fertilizers, freight charges, and Direct Benefit Transfer.

The outlay for petroleum has been increased to Rs 37,478 crore in this budget from Rs 28,394 crore in last year's budget.

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New Delhi, July 5 (IANS) To accelerate the acceptance of electric vehicles (EVs), Finance Minister Nirmala Sitharaman proposed various tax benefits for them in the Budget 2019-20.

Sitharaman, in her maiden budget presented on Friday, said that the government aims to leapfrog and envision India as a global hub of manufacturing of electric vehicles.

Besides, the government has already moved the GST Council to lower the GST rate on electric vehicles from 12 per cent to 5 per cent, she said.

"Also to make electric vehicle affordable to consumers, our government will provide additional income tax deduction of Rs 1.5 lakh on the interest paid on loans taken to purchase electric vehicles," Sitharaman said.

"This amounts to a benefit of around Rs 2.5 lakh over the loan period to the taxpayers who take loans to purchase electric vehicles."

The government has also implemented the phase-II of FAME Scheme, following approval of the Cabinet with an outlay of Rs 10,000 crore for a period of 3 years. It commenced from April 1, 2019.

The main objective of the scheme is to encourage faster adoption of electric vehicles by way of offering upfront incentive on purchase of electric vehicles and also by establishing the necessary charging infrastructure for electric vehicles.

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New Delhi, July 5 (IANS) Coming to the rescue of businesses struggling due to unresolved issues pertaining to pre-Goods and Services Tax (GST) regime and the delay in payments of Medium and Small Enterprises (MSMEs), the Buget on Friday announced a Legacy Dispute Resolution Scheme and a payment platform for ending disputes.

Finance Minister Nirmala Sitharaman said that Rs 3.75 lakh crore was stuck in pending cases of service tax and excise duty and the Sabka Vishwas Legacy Dispute Resolution Scheme 2019, will address the problem.

The GST regime was rolled out in July 2017 subsuming excise duty and service tax along with 15 other indirect taxes.

The minister said that the pending cases has been one of the major concerns of the Modi government. "There is a need to unload this baggage and allow business to move on," she said, adding that traders and businesses should take advantage of the scheme to end their disputes.

In case of voluntary disclosures, there will be relief of waiver of interest and penalty on payment of full tax dues disclosed and the person discharged under the scheme would not be liable for prosecution.

The government has also proposed a payment platform to help MSMEs recover the money from business transactions.

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New Delhi/Mumbai, July 5 (IANS) Petrol and diesel prices are set to increase from Friday midnight as Finance Minister Nirmala Sitharaman announced an additional special excise duty (SAED) of Re 1 and a road and infrastructure cess of Re 1 per litre on both the transport fuel while presenting the Union Budget 2019-20.

Currently, an SAED of Rs 7 per litre is charged on both branded and un-branded petrol and Re 1 per litre on diesel. Also, road and infrastructure cess of Rs 8 per litre is being charged on both the fuel.

"From Friday midnight, the basic prices will increase by around Rs 2 per litre of petrol and diesel. The actual prices in different states will vary, depending on local levies," All Indian Petrol Dealers Association (AIPDA) spokesperson Ali Daruwalla told IANS.

Similarly, Uday Lodh, President of the Federation of All Maharashtra Petrol Dealers Association (FAMPEDA), said that prices will go up, but the exact retail prices to be applicable in the state shall be known later tonight or early on Saturday.

The previous Budget of 2018-19 had cut basic excise duty on petrol and diesel by Rs 2 per litre. However, the move was offset by an additional levy of Rs 8 per litre under the levy of road and infrastructure cess on both petrol and diesel.

Domestic fuel prices vary in tandem with global crude and product prices on a daily basis. Last year, fuel prices surged to record levels and the Centre and states faced severe criticism over high excise duty and state levies.

In October, the government had cut excise duty to moderate the effect of rising oil prices. But this cut came after the government had raised excise duty on petrol and diesel on nine occasions, almost doubling its revenue from the oil sector.

On Friday, petrol and diesel prices in the national capital are currently Rs 70.51 and Rs 64.33 per litre, respectively.

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New Delhi, July 5 (IANS) The central government expects to get a massive fund influx from the Reserve Bank of India as dividends in 2019-20.

Accordingly, senior government official have said that around Rs 90,000 crore is expected to come from the apex bank in this fiscal. Besides, the Budget documents showed that dividends from RBI, public sector lenders and financial institutions have been pegged at over Rs 1,06,041 crore.

According to the full Budget 2019-20 documents, the "dividend or surplus of Reserve Bank of India, nationalised banks and financial institutions" has been pegged at Rs 1,06,041.56 crore from Rs 74,140.37 crore in the revised estimates for 2018-19.

In 2019-20, the dividends from public sector enterprises and other investments has been pegged at Rs 57,486.88 crore from Rs 45,124.18 crore in the revised estimates for 2018-19.

The total dividend profits has been pegged at Rs 1,63,528.44 crore from Rs 1,19,264.55 crore. Besides, the government is heavily dependent upon the dividend payout from the RBI which has been estimated at Rs 90,000 crore from Rs 68,000 crore which was reported for the previous fiscal.

Besides, a panel led by former RBI Governor Bimal Jalan was set-up late last year to decide the appropriate capital reserves the apex bank should maintain. Sources have said pointed out that the panel is likely to recommend modest amount of surplus transfer to the Centre.

It is likely to suggest about sub-1 lakh crores of transfers from the RBI kitty to Finance Ministry with the usage limited not to control fiscal deficit or spend on social sector schemes but to retire debt.

The Centre expects this amount should be at least one-third at Rs 3.6 lakh crore as the RBI has over Rs 9.6 lakh crore surplus capital with it. The Finance Ministry believes that the buffer of 28 per cent of gross assets maintained by the central bank is well above the global norm of around 14 per cent.

In the past, the issue of the ideal level of RBI reserves had been examined by three committees -- one headed by V Subrahmanyam in 1997, by Usha Thorat in 2004 and by Y.H. Malegam in 2013.

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Currently, lower corporate tax applies to firms with an annual revenue of up to Rs 250 crore. The move is set to give much-needed relief to the companies, especially MSME firms.

The proposal, however, received mixed reactions from the industry as it expected lowering of corporate tax for all the firms irrespective of their annual turnover.

"Currently, the lower rate of 25 per cent is only applicable to companies having annual turnover up to Rs 250 crore. I propose to widen this to include all companies having annual turnover of up to Rs 400 crore," Finance Minister Nirmala Sitharaman said in her maiden Budget speech.

As a result of this, lower tax would now apply to 99.3 per cent of the companies with only 0.7 per cent of the firms remaining outside the lower rate.

Ficci President Sandip Somany said that while the industry was happy to note the decision to raise the turnover limit from Rs 250 crore to Rs 400 crore for companies that would attract a corporate tax rate of 25 per cent, it had hoped that this rate will be applicable to all firms.

"Given the way tax policies are evolving globally, we need to be competitive if we are to attract and retain investments at a high level," he said.

Sumit Singhania, Partner, Deloitte India, said that widening the net for lower tax rate (25 per cent) underlined progressive tax policy thinking.

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By Arun Kejriwal

(Arun Kejriwal is founder of Kejriwal Research and Investment Services)

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New Delhi, July 5 (IANS) The Union Budget on Friday hiked the disinvestment target for the year to Rs 1,05,000 crore, up from Rs 90,000 set in the interim Budget. It proposed re-initiating disinvestment of Air India and on a case-to-case basis of Central Public Sector Enterprises (CPSEs).

"Strategic disinvestment of select CPSEs will continue to be a priority. Such disinvestment of Air India will be re-initiated. The disinvestment target for 2019-20 is Rs 1.05 lakh crore," said Finance Minister Nirmala Sitharaman, while presenting the Budget in the Lok Sabha on Friday.

She said the government is considering whether its holding can go below 51 per cent in some CPSEs on a case -to-case basis. The government has decided to modify the present policy of retaining 51 per cent government stake in public sector undertakings (PSUs), including that of government institutions, she said.

It was expected that the government would up the disinvestment target by getting out of loss-making CPSEs. What has added a new twist to the plan is the case-to-case consideration where the government could pare its stake below 51%.

More details will emerge on this from the Department of Heavy Industries and Department of Investment and Public Asset Management. This is because there is a possibility of a general impression that the Modi government is going for CPSEs' privatisation.

Last year, the government raised Rs 85,0000 crore from selling assets in Coal India Ltd and Bharat Heavy Electricals Ltd and others. The government had exceeded its disinvestment target for the 2018-19 fiscal by Rs 5,000 crore, with the proceeds touching Rs 85,000 crore. It had also crossed Rs 1 lakh crore proceeds from disinvestment in 2017-18.

In the current fiscal, though, the government hasn't been able to sell any CPSE stake despite having approval for 24 of them from the think tank Niti Aayog. All 24 of these companies are loss-making. These include Air India, Scooters India, Bharat Pumps, Project & Development India, Hindustan Prefab, Hindustan Newsprint, Bridge and Roof Co and Hindustan Fluorocarbons.

Disinvestment Secretary Atanu Bhattacharya said in the post-Budget media interaction that the profit-making PSU will not be sold. The government, she said, will undertake strategic sale of PSUs and will also continue with consolidation of PSUs in the non-financial space.

Outlining the roadmap, the Finance Minister said the government is considering going below 51% to an appropriate level, on a case-to-case basis

The government has also decided to modify present policy of retaining 51% stake inclusive of the stake of Government controlled institutions. She said the government intends to further encourage retail participation in CPSEs which, of late, has shown very encouraging upward trend.

In order to provide additional investment space, the Government will realign its holding in CPSEs, including Banks to permit greater availability of its shares and to improve depth of its market.

ETFs have proved to be an important investment opportunity for retail investors and have turned out to be a good instrument for government of India's divestment programme.

To expand it, Government will offer an investment option in ETFs on the lines of Equity Linked Savings Scheme (ELSS). This will also encourage a long-term investment in CPSEs, she noted.

Last fiscal, for Air India bids were invited, but it did not elicit any interest and government had to scrap it.

The Finance Ministry has lined up 10 IPOs for the fiscal and so far the disinvestment department has completed the RVNL -- a Railway arm IPO which raised Rs 466 crore.

With the addition of enemy property sale of Rs 1800 core so far, DIPAM has raised a little over Rs 23.00 crore. There are plans to launch a debt ETFA and a financial sector ETF this fiscal.

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New Delhi, July 5 (IANS) The Modi government has hiked the spending on health by around 18 per cent with allocation for the flagship 'Ayushman Bharat' scheme, said to be one of the major reasons for people re-electing the BJP-led National Democratic Alliance (NDA), jumping from Rs 2,400 crore to Rs 6,400 crore.

Union Health Minister Harsh Vardhan welcomed the hike and said the health sector has been strengthened with an overall increase of 18.67 per cent. He said the hike in Ayushman Bharat has been 154.8 per cent.

But healthcare experts said there was no announcement of any benefits. "Surprisingly in the budget there was no mention of any benefits and plans for healthcare," said Swati Deshpande, Director (Operations), Datar Cancer Genetics Limited.

"Easing of angel tax and relief from IT scrutiny for start-ups are great encouragement for the sector. While announcing large scale projects for electric cars, the government has completely ignored the bio-medical sector which has the potential to be a global research hub for fields like genetic research, bio-informatics and artificial intelligence," she said.

The Budget also includes some important aspects such as increase in allocation for improvement of health services in north-eastern states which saw a rise of around 77.12 per cent.

As part of strengthening of the institutions, which form an integral pillar of health systems network in the country, the provision for infrastructure maintenance has been increased by 11.42 per cent, whereas for Pradhan Mantri Swasthya Suraksha Yojana (PMSSY), an additional 4.58 per cent has been allocated.

In addition, Rs 3,000 crore will be raised through Higher Education Financing Agency (HEFA) for PMSSY projects during financial year 2019-20, said Harsh Vardhan.

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New Delhi, July 5 (IANS) As the country's NBFC sector struggles with a severe liquidity crisis, the Union Budget 2019-20 came out with several announcements to support and regulate the non-banking financial companies (NBFCs).

Presenting her maiden Union Budget, Finance Minister Nirmala Sitharaman observed that NBFCs are playing an extremely important role in sustaining consumption demand as well as capital formation in the small and medium industrial segment.

In a major relief for the sector, she said that "fundamentally sound" NBFCs should continue to get funding from banks.

"NBFCs that are fundamentally sound should continue to get funding from banks and mutual funds without being unduly risk averse. For purchase of high-rated pooled assets of financially sound NBFCs, amounting to a total of Rs 1 lakh crore during the current financial year, the government will provide one time six months' partial credit guarantee to Public Sector Banks for first loss of up to 10 per cent. Further, the Reserve Bank of India (RBI) is the regulator for NBFCs," she said in her budget speech.

She also said that as the RBI has limited regulatory authority over NBFCs, appropriate proposals for strengthening the central bank's regulation over NBFCs are being placed in the Finance Bill.

"NBFCs which do public placement of debt have to maintain a Debenture Redemption Reserve (DRR) and in addition, a special reserve, as required by the RBI, has also to be maintained. To allow NBFCs to raise funds in public issues, the requirement of creating a DRR, which is currently applicable for only public issues as private placements are exempt, will be done away with," the budget proposal said.

Further, to bring more participants, especially NBFCs, not registered as NBFCs-Factor on the TReDS platform, an amendment in the Factoring Regulation Act, 2011 is necessary, she noted adding that steps will be taken to allow all NBFCs to directly participate on the TReDS platform.

The Finance Minister also said that NBFCs should be given parity with scheduled banks in terms of taxation and proposed tax incentives to certain NBFCs.

"Presently, interest income on bad or doubtful debts made by NBFCs is charged to tax on accrual basis. However, in cases of scheduled banks, public financial institutions, state financial corporations, state industrial investment corporations, cooperative banks and certain public companies like housing finance companies, interest on bad or doubtful debts is charged to tax on receipt basis.

"To provide a level playing field, it is proposed that interest on bad or doubtful debts in the case of deposit-taking NBFC and systemically important non deposit-taking NBFC shall be charged to tax on receipt basis," Sitharaman said.

It is also proposed to provide that deduction of such interest shall be allowed to the payer on actual payment.

Further, in a bid to better regulate and strengthen the hold on housing finance companies, the Finance Minister announced the transfer of the regulatory authority of housing finance companies from the National Housing Bank to the RBI.

Commenting on the steps announced, V. Ravi, Executive Director and Chief Financial Officer of Mahindra Finance, said that improving NBFCs' access to funds from the banking sector would go a long way in rebuilding confidence and some actions like bringing NBFCs on par with banks in respect to tax reforms are well appreciated.

He, however, added: "The NBFC industry would have been glad to see the formation of a re-financing body which would address the liquidity stress created by certain entity specific events that tend to affect the sector as a whole. We believe a first step to that is enhancing the regulatory authority of the Reserve Bank of India over the NBFCs."

George Alexander Muthoot, MD of Muthoot Finance, said: "Nirmala Sitharaman has highlighted the government's thrust to infuse liquidity in the NBFC sector. In line with our expectations, the Debt Redemption Reserve for public issues has been exempted. Also, the credit guarantee provided by the government will further open up the liquidity line for fundamentally sound NBFCs."

The liquidiy crisis in the NBFC sector came to light after the infrastructure lending major IL&FS defaulted on a commercial paper last September. Following the default, the company has gone into an acute crisis and resolution is going in the National Company Law Appellate Tribunal (NCLAT) along with investigations of fraud and misappropriation on its previous management, its auditors and rating agencies.

Several other finance companies have come to the brink of default and have delayed their dues on Non-Convertible Debentures and commercial papers off late, raising major concerns over the financial health of the segment.

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New Delhi, July 5 (IANS) Seeking to ease the compliance burden, Union Finance Minister Nirmala Sitharaman has proposed a slew of measures including interchangeability of PAN and Aadhaar and faceless assessment in electronic mode with no human interface.

"India's Ease of Doing Business ranking under the category of 'paying taxes' showed a significant jump from 172 in 2017 to 121 in 2019. I now propose to implement series of measures that will leverage technology to make compliance easier for the taxpayers," Sitharaman said while presenting her maiden Budget.

Accordingly, she proposed to make PAN and Aadhaar interchangeable and allow those who do not have PAN to file Income Tax returns by simply quoting their Aadhaar number. The taxpayers may also use it wherever they are required to quote PAN.

Nitin Baijal, Director, Deloitte India said that the Budget was an effort at laying down a clear roadmap for tax administration over the next five years with introduction of a slew of measures specifically aimed at simplifying the tax filing process, e-assessment process and interchangeability of PAN with Aadhaar.

Pre-filled tax returns will be made available to taxpayers which will contain details of salary income, capital gains from securities, bank interests, and dividends etc. and tax deductions. Information regarding these incomes will be collected from the sources concerned such as banks, stock exchanges, mutual funds, EPFO and state Registration Departments among others.

"This will not only significantly reduce the time taken to file a tax return, but will also ensure accuracy of reporting of income and taxes," the Finance Minister said in Lok Sabha.

With interchangeability of Aadhaar and PAN proposed, the country is likely to move towards one identity number as in case of social security number in the US.

Neel Ratan, Partner and Leader- Government and Public Sector, PwC India said that the move was perhaps the first step to abolish PAN altogether for individuals.

"This also paves the way for better tax compliance with a single identifier and data driven governance," Ratan noted.

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New Delhi, July 5 (IANS) In her maiden Budget speech, Finance MInister Nirmala Sitharaman on Friday gave Indian Railways the highest-ever outlay for capital expenditure amounting to Rs 1.60 lakh crore and a budgetary allocation of Rs 65,837 crore.

According to the budgetary estimates, the capex in regular Budget has been increased from Rs 1,58,658 crore in interim budget to Rs 1,60,175.64 crore due to enhancement in gross budgetary support of Rs 1,250 crore and contribution from Nirbhaya fund of Rs 267.64 crore.

This is the highest-ever allocation for the national transporter.

Railway officials said the regular Budget capex was high by Rs 26,779 crore as compared to the the actual Budget of 2018-19.

Last year, the outlay for the railways was Rs 1.48 lakh crore while the Budget allocation was Rs 55,088 crore.

The Budget has allocated funds of Rs 7,255 crore for construction of new lines, Rs 2,200 crore for gauge conversion, Rs 700 crore for doubling, Rs 6,114.82 crore for rolling stock and Rs 1,750 crore for signalling and telecom.

The allocations have remained the same as in the interim budget in February, which was presented by the then Finance Minister Piyush Goyal, who is also the Railway Minister.

Earlier in the day, Sitharaman while presenting the Budget in the Lok Sabha, stressed that railway infrastructure would need an investment of Rs 50 lakh crore between 2018 and 2030 and proposed that a public private partnership (PPP) be used to unleash faster development and delivery of passenger freight services for railway projects to boost connectivity.

Sitharaman said: "It is estimated that railway infrastructure would need an investment of Rs 50 lakh crore between 2018 to 2030. Given that the capital expenditure outlays of railways is between Rs 1.5 to 1.6 lakh crore per annum, completing even all sanctioned projects would take decades.

"It is therefore proposed to use public-private partnership to unleash faster development and completion of tracks and rolling stock manufacture and also delivery of passenger freight services."

She said the national transporter will be encouraged to invest more in suburban network through special purpose vehicle structures such as the Rapid Regional Transport System. Such a system is proposed on the Delhi-Meerut route.

"I propose to enhance the metro railway initiative by encouraging more public private partnership initiatives and ensuring completion of sanctioned works while supporting transit oriented development to ensure commercial activity around transit hubs," she said.

Railway stations modernisation will also be launched this year, she added.

Developing passenger amenities seemed to to be the focus of the government with the planned expenditure on that count being allocated Rs 3,422.57 crore which is an additional outlay of around Rs 1,000 crore for the comfort of rail passengers.

Railways headache would remain is the revenue expenditure which includes an estimated salary payout of Rs 86,554.31 crore, about Rs 14,000 crore more than last year.

The Budget estimates also allocated Rs 267.64 cr for Nirbhaya Fund including provision of Rs 250 crore for Integrated Emergency Response Management System (IERM) (Video Surveillance System) and Rs 17.64 cr for Konkan Railway Corporation Ltd.

Estimates under Gross Traffic Receipts for the year 2019-20 have been placed at Rs 2,16,675 crore involving an increase of Rs 19,961 crore over the Revised Estimates 2018-19.

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New Delhi, July 5 (IANS) Cash withdrawal of Rs 1 crore or more from bank accounts over a year is set to attract tax as the government moves to take the economy towards use of lesser amounts of cash.

The Union Budget has proposed tax deduction at source at the rate of 2 per cent on cash withdrawals in excess of Rs 1 crore per year from an individual bank account.

"Some business models, where large cash withdrawal is a necessity, are proposed to be exempted," Finance Minister Nirmala Sitharaman said while presenting her maiden Budget.

The government may notify the accounts to which these provisions shall not be applicable in consultation with the Reserve Bank of India (RBI).

Further, merchant discount rate (MDR) charges have been waived on cashless payments.

"In order to discourage the cash transactions and for less cash economy, the government has proposed to insert a new section 194N which provides for levy of TDS at the rate of two per cent on cash payments in excess of Rs 1 crore in total made during the year by a banking company or cooperative Bank or post office, to any person from an account maintained by the receipt," said Tarun Garg, Manager-Tax, Deloitte India.

The move to incentivise digital payment and discourage cash transaction is set to help fintech companies like PayTm and PhonePe.

"Digital India being a flagship programme of the government, in its second term the government has taken a step further in promoting digital payments," said Rakesh Nangia, Managing Partner, Nangia Advisors (Andersen Global).

For ensuring that businesses provide facility for making payment through the low-cost electronic mode, the Budget has proposed to insert a new section allowing firms with annual turnover of Rs 50 crore or more to do so.

"For ensuring compliance, a suitable penalty provision is also proposed to be inserted in the Act," said Finance Minister Nirmala Sitharaman.

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New Delhi, July 5 (IANS) Finance Minister Nirmala Sitharaman did not lose purse strings to fund modernisation of the armed forces in the Union Budget presented on Friday, as the allocation for defence remained on the lines of the interim Budget presented earlier this year as the outlay stood at Rs 3.18 lakh crore.

Defence allocation did not find mention in her speech as she only announced exemption of customs duty on import of defence equipment not manufactured in the country and said that immediate modernisation and upgradation of armed forces was a national priority.

But experts claimed that the money allocated was not enough. "The Budget does not meet the financial needs of the 200-odd contracts signed. The modernisation needs impetus and the budget should have incentivised the indigenous capabilities and contributed more to Make in India," said Lt. General Vinod Bhatia (retd.), emphasising on the need for expansion of defence manufacturing base.

"The interim Budget presented by Piyush Goyal in February had already given the allocation to the Defence Ministry for the entire year. The allocation made in the interim Budget was higher than last year's budget which was around 8 per cent increase than last year's Budget," said Air Marshal S.B.P. Sinha (retd.).

Out of the Rs 3.18 lakh crore defence budget, the outlay for capital expenditure (for purchases of equipment) is Rs 1,08,249 crore.

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New Delhi, July 5 (IANS) Nirmala Sitharaman, India's first full-time woman Finance Minister, made a striking picture as she presented her maiden budget in Parliament on Friday. Attired in purple silk saree, Sitharaman spoke in English with occasional sprinkling of broken Hindi in her over two-hour budget speech, and on several occasions repeated her sentence to drive home the point.

"Karya purusha karena lakshyam sampadyate" (with determined human efforts, the task will surely be completed)," she quoted a Chanakyaniti Sutra right at the beginning of her speech and sort pardon of the House for her pronunciation as she read out the Urdu couplet, "Yakeen ho to raasta nikalta hai, hawa ki ot bhi lekar chirag jalta hai (A way is found if there is belief as a lamp keeps burning despite the wind).

There was silence among the Opposition benches, in sharp contrast to earlier budget presentations when they would drown out the Finance Minister's speech with heckling and protests. The silence was possibly because of the massive drubbing the Opposition parties suffered in the just-concluded Lok Sabha elections and the fact that the Narendra Modi government has returned to power with an even bigger mandate.

The only time the Opposition benches showed some kind of protest was when Sitharaman proposed an additional excise duty and cess of Rs 1 per litre each on petrol and diesel for infrastructure projects. There was no vociferous shouting, but only a murmur of protest.

Sitharaman's budget proposals on issues, ranging from women's empowerment to startups, and on taxation, were greeted with appreciative thumping of the desks by the treasury benches, including by Prime Minister Narendra Modi.

Congress leader Rahul Gandhi was seen seated alongside UPA Chairperson Sonia Gandhi listening with rapt attention.

When the Finance Minister quoted from Swami Vivekananda, to stress on women empowerment, and reiterated that India's tradition is steeped in "Nari tu Narayani" -- the woman is a goddess -, there was loud appreciation all around. Union Women and Child Development Minister Smriti Irani was seen smilingly thumping her desk in appreciation.

Sitharaman recalled Swami Vivekananda's words that "there is no chance of welfare in the world unless the condition of women in India is improved." Sitharaman announced a loan facility of Rs 1 lakh for women self-help group members through the Mudra scheme, among other measures for women's empowerment.

Sitharaman also quoted from a Tamil poem of the Sangam era, to explain the taxation policy. DMK MPs Dayanidhi Maran and A. Raja were seen smiling in appreciation when she spoke in Tamil and explained the meaning of the stanzas from the poem Purananooru.

Giving the meaning in English, Sitharaman said: "Just a few mounds of rice from paddy that is harvested from a small piece of land would be sufficient for the elephant. But what if the elephant itself walks into the field to eat? It would eat much lesser than it would trample with its foot," to smiles all around. Similarly, if people paid their taxes properly there would be no need for the government to get into it, she said.

Sitharaman also spoke a line in halting Hindi, about the government's proposal to help artisans. She said she was speaking in Hindi in order to get the message across to the people concerned. There was loud appreciation from the House.

Earlier, Sitharaman did away with the tradition of carrying the budget papers to Parliament in a briefcase and instead brought them in a red folded cloth, in traditional style.

According to Chief Economic Advisor Krishnamurthy Subramanian, "it is a 'bahi khata' (ledger) and symbolises India's departure from the slavery of Western thought".

Sitharaman's parents were in Parliament to witness their daughter present the Union Budget.

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New Delhi, July 5 (IANS) In a bid to attract greater overseas capital into the country, Finance Minister Nirmala Sitharaman has proposed to allow 100 per cent Foreign Direct Investment (FDI) into insurance intermediaries.

Besides, she also proposed in the full-Budget 2019-20 that local sourcing norms will be eased for FDI in 'Single Brand Retail' sector.

According to the Minister, the government will examine suggestions of further opening up of FDI in aviation, media (animation, AVGC) and insurance sectors in consultation with all stakeholders.

India's FDI inflows in 2018-19 remained strong at $64.375 billion marking a 6 per cent growth over the previous year.

However, global FDI flows slid by 13 per cent in 2018, to $1.3 trillion from $1.5 trillion the previous year - the third consecutive annual decline, according to UNCTAD's World Investment Report 2019.

On its part, India Inc welcomed the FDI announcement with industry body Assocham President B.K. Goenka terming Sitharaman's maiden budget as a mega investment-oriented initiative.

"Currently, the FDI policy on 'Single Brand Retail Trade' provides for a 30 per cent local sourcing preferably from MSMEs, village and cottage industries, artisans and craftsmen where the FDI exceeds 51 per cent," said Paresh Parekh, Partner and National Tax Leader, Consumer Products and Retail, EY India.

"While there was a recent relaxation provided to offset the sourcing from India for global operations against the local sourcing, the same didn't have the expected impact to boost FDI in the sector. There was a lot of reluctance by the existing foreign JV players in the sector to increase FDI beyond 51 per cent to avoid coping with the sourcing norms and also reluctance shown by new foreign brands to enter the sector owing to the sourcing norms."

Accordingly, the budget proposal to relax the local sourcing conditions in the sector is expected have a "big positive impact for the existing players and also to the sector owing to the new FDI which should now enter the sector".

"It is clear that India needs investment in dollars to drive growth," said Vivek Gupta, Partner and National Head, M&A, KPMG in India.

"The statement regarding easing FDI norms for aviation, media, single brand retail and insurance intermediaries is welcome and will spur investments -- but the more interesting signals are on enabling further FPI participation in debt as well as the soundings around allowing more capital into REIT and INVIT platforms."

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