Share Market

Union Budget 2020

Highlights of 2020 Union Budget

Finance Minister Nirmala Sitharaman is out with the Union Budget 2020-21 introducing several manifestos concerning personal tax regime. Presented on 1st February 2020, the budget proposed to introduce several changes in determining the residential status of certain categories of individuals. More importantly, the new optional personal income tax system becomes the major highlight of the overall budget.

The Finance Minister, Nirmala Sitharaman, on presenting the Union Budget for 2020-21 addressed the assembly: 

“In May 2019, Prime Minister Narendra Modi received a massive mandate to form the government again. People of India have unequivocally given their janadesh for not just political stability, but have also reposed their faith in our economic policy. This is a budget to boost their income and enhance their purchasing power.”

Some of the other key takeaways became the multi-billion-dollar farm, healthcare package, and infrastructural growth to shape the country’s growth in multiple disciplines. The budget emphasized building a powerful and highly empowered status of marginalized sections of the society, meanwhile protecting the wealth creators. The budget is to boost the income generation and purchase power of the people. Also, the Minister announced the rise in bank depositor’s insurance coverage to Rs 5 Lakh from 1 Lakh. This hopeful introduction in the times of market slowdown becomes a great motivator for the people of India.                                                                                                                  

Here is a sector-wise impact of the Budget 2020-21: 

Positive Impact

Consumer Goods and Consumer Durables

One of the biggest changes that can be accounted for concerning custom duties came from the consumer goods and consumer durables sector. The minister shared the hiked custom duties on small appliances from 20% - 10%, import processing products to 100%, custom duty on refrigerators and AC hiked to 12% from 10%. Other than that hike in fan custom duty from 10% to 20% and increment in import duties on footwear from 35% to 25%. 

The decision is expected to boost domestic consumer manufacturing companies. 

Healthcare

The government is said to provide a viability gap funding for setting up hospitals under the PPP model. This means the government will be allocating about Rs 69,000 crores in the financial year 21 for the healthcare sector. This shows some positive responses from the public where now the government will be using the proceeds from the taxes on medical instruments in the development of hospitals and other positive implementations.

Also, Rs 6400 crore is allocated for PM Jan Arogya Yojana and under Indradhanush Yojna 12 new disease immunization plans to expand. 

Education 

As good news to the students of India, the budget of FY21 is looking more hopeful for the education sector of India. Rs 99, 300 crores are allocated alone to the education sector of India for the FY of 21. Elaborating further, the minister reveals 150 higher education institutes will be opened to offer apprenticeship diplomas as of by March 2021. For the same, the government will be pooling money from external commercial borrowing (ECB) and foreign direct investment (FDI).

FMCG 

Minister of Finance Nirmala Sitharaman introduces changes in the personal income tax slabs by exempting the tax limit to Rs 5 Lakh. She also reveals there will be a lowering of the tax slab for the income between Rs. 7.5 to Rs 10 Lakhs to 15% from 20%. Also, the same lowering of the tax slab was seen in the tax slab from Rs 10-12.5 Lakh from 30% to 20%.

Information Technology 

IT is one of the few untouched sectors to remain growth driven in the economic slowdown, the news of a reduction in the dividend distribution tax for IT firms from India was a delight out of nowhere. Here the DDT will not be paid now by the companies but the shareholders will be responsible to pay the same. Also, the government allocated about 8,000 crores over the next 5 years for the national mission of quantum technology. 

Renewable Energy 

The government affirms to allocate Rs 22,000 Crore to the power and renewable sector. The minister hints to shut the thermal power units if the emission grows out of the limit. Adding further to it, she shared to help the farmers of India more solar power units and solar-powered energy resources will be installed at Indian Railway Stations. 

Also, the expansion of the national gas grid from 16,200 Km to 27,000 km has to be established with more reforms such as ease of transaction and transparent price discovery to follow. Also, the Minister requests the states and UTs to replace the conventional energy meters to pre-paid smart meters in the coming 3 years, this gives consumers the freedom to choose suppliers and meet out their needs in their budget constraint. 

Infrastructure

One of the biggest news also came from the infrastructure sector, where the government is to allot about 18,600 Crores worth Bangalore suburban transportation projects. This means 4 station redevelopment projects in railways will be initiated and will be taken by the PPP model. 

Also, 5 new smart cities will be set up via the PPP model. Rs. 1.7 lakh crore alone is declared to be allocated for the transportation services. 100 more airports are being planned to be set up by the year 2024 under the UDAN scheme. Also, about 22, 000 crore will be provided for supporting the national infrastructure pipeline. 

In the coming years, India plans to install larger power soar capacity alongside the railway tracks and lands owned by the railway. Also, more premium Shatabdi Express Category trains such as Tejas will be available. 

9000 Km Economic corridor and 2000km long coastal road will be developed starting from Chennai to Bengaluru Expressway. 

Agriculture

Rs 2.83 lakh Crore fund is allotted for agriculture and irrigation. The Government of India wished to help about 20 lakh farmers to set up solar pumps. This way power-shortage and irrigation problems are bound to get solved. Also, power prices are easily fought out. farmer market will be liberalized in layman terms, it will be more balanced out to encourage the use of fertilizers to increase the production. However, with this, there will be more use of chemical-based fertilizers. 

Sectors to receive negative impact

Two sectors to receive a hard blow from the budget of FY21. The government of India proposes to increase the excise duty on tobacco and cigarettes, this will surely cause some effect. Also, the insurance sector too will be impacted as the government raised the bank deposit insurance to 5 lakhs from Rs 1lakh. 

Basis the above-simplified details of the budget, we suggest keeping a close watch on the stocks of the sector who will benefit out of the budget allocation as the fortune may favor them. In case you have some investments in the stocks who will see a slight downfall, we recommend to hold and see the further course of action for proper corrective measures backed by the accurate data.