Feb 04, 2019 5 min read

MySIPonline’s Experts Analysis Budget 2019: Here Is All You Should Know

Read the blog to know what experts at MySIPonline think of the presented budget 2019. Also, find its impact on the market as well as the economy.

The recently presented Interim Budget 2019 is considered as the mother of all the election budgets by many industry experts. It can be referred to as the populist budget as it is build keeping focus on the significant population which include small farmers and middle-class people. The presented policies in the budget are mainly states to benefit this section of the country.

Exemption from subsidies and discount on loan are a few steps in the direction. The indirect goal of the set budget 2019 presented by FM Piyush Goyal is to increase the consumption amongst the major class of people which will further increase spending, thus help in raising the GDP of the country.

Let’s start understanding the presented budget from the viewpoint of the experts at MySIPonline. As we proceed, you will learn about the impact of the interim budget on the market as well as on the economy.

The Objective of the Presented Budget

As stated earlier, the budget can be understood as a populist budget which is made keeping the interest of the major people into concern. This will benefit a larger section of the people with policies such as subsidies and loan waive. The focus is set on the middle-class, and small farmers and policies have been launched for these people. The indirect objective is to increase the consumption among the people where spending will also increase, and thus create an upsurge in the GDP.

This budget, however, can create a much financial burden on the Government, which will thus increase the fiscal deficit. Increase in fiscal deficit represents an increase in the Government expenditure more than the revenue. This situation is not considered good for the economy. However, if the consumption in the country increases as per the estimated numbers, then the Government will be able to generate good revenue in the form of tax. All such impacts will be clear in the long run.

For now, let’s revise the presented policies in the budget and finally study its impact.

  1. The biggest news is for the middle-class salaried individuals who are provided with tax benefits. Individuals with income up to Rs 5 lakh will be exempt from paying tax. Also, people with an income of Rs 6.5 lakh can too invest Rs 1.5 lakh in investment avenues under Section 80C, thus making their taxable income of Rs 5 lakh and reducing the burden of paying tax.
    One must understand that there is no change in the tax slab or tax rates. This proposal can be seen as the indirect benefit as before on a salary of Rs 5 lakh, Rs. 12,500/- was the maximum tax.
  2. Earlier, the interest earned of more than Rs 10,000 on bank or post office was taxable which is automatically deducted through the TDS form. This limit is increased to Rs 40,000 as no TDS will be applicable for the interest earned of Rs 40,000 or less.
  3. Also, an increase from Rs. 1,80,000 to Rs. 2,40,000 is introduced in the TDS threshold for deduction of tax on rent. Now, people can enjoy the benefit of rollover of capital gains from investment in one residential house to two residential houses for gains up to Rs 2 crores.
  4. The assessment of income tax will be made electronic soon. This will increase the processing, and thus people will be able to get a refund soon within 24 hrs.
  5. Small and marginal farmers, which are nearly 12 crores in number, will be provided with an assured yearly income of Rs 6000 per annum under PM KISAN Scheme. An outlay of Rs. 75,000 crore for FY 2019-20 with additional Rs. 20,000 crore in RE 2018-19.
  6. Workers falling under unorganized sectors will now be benefited with the Government Pension Scheme where they will get Rs 3000 per month as pension amount after retirement. For this, the worker, as well as the Government, will contribute Rs 55 each month equally.
  7. An important announcement was also for small businesses which state that the businesses with a turnover of less than Rs. 5 crores will now have to pay GST on a quarterly basis and not on a monthly basis.

Implications of Interim Budget 2019-20 on Economy and the Market

First and foremost, talking about fiscal management, the Government has raised the Fiscal Deficit from the target of 3.3% to 3.4%. The earlier target of 3.3% was not achieved. Still, the Modi Government has come a long way to reducing the fiscal deficit in the past four years which was more than 5% back then. Considering it a populist budget, it might create a financial burden on the Government. With the relief on the direct tax, revenue will get impacted and also with the new policies on the expenditure side, the burden can further rise. Alongside, the Government has promised to make Indian economy worth Rs 5 trillion dollars; this states that the economic growth will be on a fast trend now. The primary focus will be on infrastructure development, consumption growth, and rural and agricultural development. This states that the industries related to these segments will also progress with leaps and bounds.

The other focus of the presented budget 2019 was on renewable source of energy where the decisions of importing less oil and increasing the production of renewable energy, especially solar energy were made.

The auto industry can too expect good growth, where, in the coming time, electric vehicles can replace diesel and petrol vehicles. Besides this, electricity and power segment can also expect good growth wherein electricity and power generation might play a significant role in rural development.

All these policies thus introduced in the Interim Budget state that the budget distribution and planning is done in favor of the economic growth of the country. The real impact will be known once the policies are implemented.

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