Union Budget 2020-2021: Has Nirmala Sitharaman met the expectations? Here’s what India Inc thinks

Highlighting fresh allocations, new income tax slabs, 16-action point for boosting agriculture, healthcare boost, start-ups, real estate and other announcements.


In a longest Budget speech ever, Finance Minister Nirmala Sitharaman presented the Union Budget 2020-2021. The FM – who had to cut short her Budget speech as she felt unwell after speaking for about 2 hour 45 minutes – started her speech with paying tribute to late Finance Minister Arun Jaitley; and divided the announcements in three vital themes.

Three themes are: Aspirational India – better standards of living with access to health, education and jobs for all sections of the society; Economic Development for all – ‘Sabka Saath’, ‘Sabka Vikas’, ‘Sabka Vishwas’; and Caring Society – both humane and compassionate, Antyodya as an article of faith.

A look at key highlights of Budget 2020-2021:

The Budget 2020 has proposed a new tax regime, slashing income tax rates and rejigging tax slabs.

Here’s the revised Income Tax slabs

  • No income tax for individuals earning up to Rs. 5 lakh
  • 10 per cent for income between Rs. 5 lakh- Rs. 7.5 lakh (earlier 20 per cent)
  • 15 per cent for income between Rs. 7.5 lakh- Rs. 10 lakh (earlier 20 per cent)
  • 20 per cent for income between Rs. 10 lakh- Rs. 12.5 lakh (earlier 30 per cent)
  • 25 per cent for income between Rs. 12.5 lakh- Rs. 15 lakh (earlier 30 per cent)
  • No change in tax for income above Rs. 15 lakh. Income tax remains 30 per cent.
  • A person earning Rs. 15 lakh/annum and not availing any deductions will now pay Rs. 1.95 lakh income tax, instead of Rs. 2.73 lakh.
  • The new personal income tax regime entails an estimated revenue foregone amounting to Rs. 40,000 crore per year.
Budget failed to lift market sentiments

The government pegged “nominal” gross domestic product (GDP) growth at 10 per cent for FY2020-21 in the Budget. However, the industry stakeholders doubt if this is enough to revive the economy in the next few quarters.

“With Budget measures, I am not sure if India can achieve the real GDP growth rate of 6 per cent in FY2021,” Sunil Damania, CIO, MarketsMojo.com states.

From the stock market point of view, dividend distribution tax (DDT) has been removed and would be taxed in the hand of the recipients. This means high net-worth individuals (HNIs) would pay tax at the highest slab on their dividend income, he further explains.

“No announcement of long-term capital gains (LTCG) is another disappointment. The budget has failed to lift market sentiments, and hence the market will have to take a cue from global factors and earnings seasons for its next movement. The FM has failed to live up to expectations.”

Sensex logged its biggest single-day decline in more than three years, as it nosedived nearly 1,000 points in a special trading session on Saturday, as market participants gave a big thumbs down to Budget for 2020-21.
NSE’s 50-share Nifty too declined 2.66 per cent (318.30 points) to close at 11,643.80 points.

Shakir Ebrahim, founder, GoBisbo Broadcasting and creator of Bisbo, on the other hand, believes that Budget doesn’t help build strengths and capabilities to become a $ 5 trillion-economy.

“The gross under-reporting of the budget deficit at 3.8 per cent of GDP instead, shows a polity still trying to hide systemic problems which have led us there. The imposition of higher duties on Chinese goods is also a virtual admission that we are not confident of competing with China.”

Infographic: India's GDP Growth Slows to 6-Year Low | Statista You will find more infographics at Statista
Retailers feel new tax regime to boost consumption

Indian retail sector is all cheered about the focus of the Budget on ease of doing business, infrastructure development in agriculture and transportation of goods, access to funds, and single-window investment clearance cell for startups, extension of tax audit threshold for small retailers from annual turnover of Rs. 1 crore to Rs. 5 crore.

Retailers Association of India CEO Kumar Rajagopalan says the mandate to states for adopting model laws and decriminalization of statues are some welcome moves. “Mandating the states to implement model laws set by the Centre should get things moving on the pending implementation of regulations like the Model Shops & Establishments Act and the Model APMC Act. It will also pave the way for National Retail Trade Policy.”

The announcement of a National Logistics Policy and improving logistics infrastructure bodes well for logistics as well as retail companies. Extension of tax audit threshold for small retailers will promote ease of compliance. “However, it may not have significant benefit in the short term as it requires less than 5 per cent cash transactions,” Rajagopalan adds.

Referring the new tax structure as the feel-good factor in the Budget announcement, Sachin Dhanawade, COO-retail and real estate, Grauer & Weil (India) Limited says this would give more money in the hands of the consumer and boost consumption, “unless negatively impacted by the revised exemptions.”

On the other hand, Akhil Jain, executive director at a retail brand Madame, sees National Technical Textile Mission with an outlay of Rs. 1,480 crore is a great move by the Finance Minister.

“The bigger chunk of this investment must be utilized for skill development, tech and automation to get higher efficiency for faster and cost-effective produce.”

Akhil Jain, Executive Director, Madame
Key takeaways for MSMEs
  • To reduce the compliance burden on MSMEs, turnover threshold for audit raised to Rs. 5 crore from Rs. 1 crore. Provision for businesses with less than 5% business transaction in cash
  • Amendments to be made to enable NBFCs to extend invoice financing to MSMEs
  • More than 5 lakh MSMEs benefited from RBI’s restructuring of loans
  • Reserve Bank of India to consider extending restructuring scheme for MSMEs by another year till March 31, 2021
  • App-based invoice financing loans product to be launched, to obviate problem of delayed payments and cash flow mismatches for MSMEs
  • National Logistics Policy to make MSMEs more competitive
  • Rs. 1,480 crore for National Textile Mission
  • New investment clearance cell to be set up
  • A new scheme will be launched to achieve higher export credit. The scheme will offer higher insurance cover, reduced premium for small exporters and simplified procedure for claim settlements
What’s in it for agriculture sector

With the aim of doubling farmers income by 2022, FM Nirmala Sitharaman proposes 16-point action plan to boost agriculture and farmers’ welfare:

  • Rs. 2.83 lakh crore will be allocated to agriculture; plans to help farmers use proper manure and little water, encourage balanced use of fertilizers, including organic
  • Comprehensive measures to address shortage in 100 water-stressed districts
  • Annadata scheme to be expanded to include “Urjadata” to help farmers link pumps to solar grid. Farmers having fallow and barren lands can set up solar power generation units and they can sell it to grids to make a living
  • Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan (KUSUM) will be expanded to provide 20 lakh additional farmers with standalone solar pumps
  • National Bank for Agriculture and Rural Development (NABARD) to undertake an exercise to map and geo-tag warehouses across the country, provide viability funding to set up new ones. Food Corporation can undertake such projects in its land too.
  • Empowerment of rural women – proposal of village storage schemes run by SHGs. Women SHGs can avail MUDRA or NABARD assistance, under Dhanalakshmi scheme
  • Seamless national cold supply scheme: Indian Railways to set up ‘Kisaan Rail’, with refrigerated coaches in trains for milk and other perishable produce. ‘Krishi Udaan’ will be launched by the Civil Aviation Ministry on national and international routes, with an aim to increase connectivity in northeast and tribal districts.
  • Horticulture sector exceeds the production of food grains at 311 million metric tonnes. In each district, one product to be encouraged with the help of state governments
  • Integrated farming systems in rain-fed areas to be expanded to encourage solar energy, beekeeping, etc. in non-farming seasons
  • Online organic market to be strengthened
  • Proposes doubling of milk processing capacity to 108 million metric tonnes by 2025
  • Fish production to go up to 200 lakh tonnes by 2021-22
  • Youth to be involved in fisheries sector as ‘Saagar mitras’ and form 500 fish farmer producer organizations
  • Rs. 15 lakh crore agricultural credit to be made available by 2021
  • Growing of algae and seaweed to be encouraged as part of marine development
  • Proposal to eliminate foot and mouth disease, brucellosis in cattle, PPR in sheep by 2025

On the plethora of schemes for farming and agriculture, Syngenta India chief sustainability officer KC Ravi believes model agriculture laws would bring in the right incentive for more public-private partnerships and the introduction of new technologies. 

”Hopefully, the enhanced allocation and the announcement would translate into tangible programmes where there is the deployment of cutting-edge scale neutral technologies in seeds, crop protection, and other inputs to boost agriculture growth as well as to achieve the government’s objective of doubling farmer’s income by 2022.”

On irrigation and warehouse measures, Ravi adds that the stress on boosting agriculture warehousing, such as cold storages, would help in preventing the wastage of crops and will strengthen the farmer’s capacity to wait for better prices for their produce.

“While scheme to enable FCI and Warehousing Corporation of India sprucing up their warehousing facility is good, the new village storage scheme to boost backward linkage is further laudable. It shall empower small and marginal farmers immensely by helping them the ability to store more, and also reduce the logistic costs. Women in the village will be responsible for managing this seamless storage mechanism,” he feels.

Additionally, NIRVIK will ease the lending process and enhance the availability of credit to exporters. “Under the scheme, the insurance over guarantee will now cover up to 90 per cent of the principal and interest both on pre and post shipment credit,” quips Sharad Kumar Saraf, president, Federation of Indian Export Organisations (FIEO).

Source: PIB
Several measures to boost entrepreneurship, tech
  • Investment clearance cell to provide ‘End-to-end’ facilitation and support to entrepreneurial youth
  • Developing five new smart cities in collaboration with states in PPP mode
  • Encouraging manufacturer of mobile phones, electronic equipment and semiconductor packaging
  • National Technical Textiles Mission to position India as a global leader
  • Rs. 8000 crore allocated over the next five years for quantum technology related computing 
  • A policy will be set up to build data centre parks throughout the country
  • All public institutions at Gram Panchayat levels will be provided with digital connectivity
  • Fibre to home through BharatNet will link 100,000 Gram Panchayats in FY2021
  • Allocation of Rs. 6,000 crore will be provided for BharatNet
  • Two national level science schemes to be set up for getting a comprehensive national-level database.

While the emphasis on mobiles, the largest import bill in electronics and ATMP is welcome, the government needs to include IT, datacom, medical and other sub-sectors of electronics. While the scheme is still in the works this will result in rise in exports from India, according to Manufacturers’ Association of Information Technology (MAIT) president Nitin Kunkolienker.

In addition, Manu Jain, global VP and India MD of Xiaomi believes that the threshold for small businesses requiring audit from Rs. 1 crore to Rs. 5 crore, if cash transaction is less than 5 per cent, will spur the demand for PCs and POS.

At the same time, data centre parks throughout the country would reap benefits such as “on-demand access to ICT infrastructure, cater to Indian regulatory requirements as well as drive scalability for businesses in India,” notes Deepak Mittal, CEO & Co-founder, TO THE NEW, while also adding that the industry was expecting the government to announce measures with respect to Data Protection.

Investment Clearance Cell for entrepreneurs to offer assistance in funding, according to Mittal, will certainly encourage more start-ups to set up their businesses in India.

“The multiple measures announced are positive but we must go beyond vocation skilling to include entrepreneurship training in schools and colleges, massively improve ease of doing business on the ground (onerous inspections, registration, labour norms) and greatly enhance access to credit especially small-businesses with less than 5 employees,”

feels Ravi Venkatesan, founder and chairman, The Global Alliance for Mass Entrepreneurship (GAME).

On another note, GoBisbo’s Ebrahim said, “We had expected infrastructural support for Indian companies to come up to speed with the servers which support more substantial streaming services like Netflix and YouTube. Instead of looking at Digital India and Modi’s digital dream, the budget cuts custom duty on newsprint by half.

Not much for real estate

While Anuj Khetan, director at Vijay Khetan Group, believes that the Budget had very little for the real estate industry, which contributes nearly 6-8% to India’s GDP; Rajan Bandelkar, president, NAREDCO West and MD at Raunak, adds the sector had pinned high hopes on the Budget, as the sector has been reeling under pressure and is on the verge of collapse.

“This core sector drives demand in ancillary sectors and creates employment opportunities too. Not addressing the key issues will worsen the future and make the going unviable. The Government can still take immediate steps to bring the sector back on the track before it is too late,” Bandelkar further notes.

However, Khetan sees the announcement proposed to extend Rs. 1.5 lakh benefit on interest paid on affordable housing loans by a year is a move to encourage the developers to invest more in affordable housing. Also, the tax holiday provided on profits earned by developers of affordable housing projects is a big relief to the sector.

On the other hand, Kaushal Agarwal, director at real estate advisory & consultancy firm, The Guardians Real Estate Advisory expects that the decision to offer an optional tax regime that reduces the direct tax on personal income, will help increase the home loan EMI appetite of the consumers and will have a significant impact on generating demand for real estate.

Infrastructure boost
  • 100 more airports to be developed by 2024 to support UDAN Scheme
  • Rs. 22,000 crore for power and renewable energy sector
  • National Gas Grid to be expanded from the present 16200 km to 27000 km
  • Rs. 103 lakh crore for National infrastructure pipeline: Rs. 22,000 crores via equity support to infrastructure finance companies

Mandeep Singh, CEO and executive director, JSL Lifestyle believes the current fiscal measures to revive manufacturing and production will certainly enable us to achieve 6-6.5 per cent GDP by 2021.

“The intent to utilize available resources with increased spend in infrastructure, railways and transportation amongst various other sectors is an absolute roadmap to overcome the current economic slowdown,” Singh shares.

New education policy soon
  • Allocation of Rs. 99,300 crore in 2020-21 and Rs. 3,000 crore for skill development
  • Government will work to promote ‘Study in India’
  • Degrees can be taken online soon and will be offered by the Top 100 NIRF ranked institutes
  • IND-SAT exam will be held for Asian and African students for scholarships to ‘Study in India’
  • Police Academy and Forensic Sciences will be set up
  • Fresh National Education Policy (NEP) soon

Addressing the huge opportunity in the education sector, FM Sitharaman said: “There is a huge demand for teachers, nurses, paramedical staff and care givers abroad. However, their skill-sets do not match standards and needs to be improved.” For this a total of 150 higher education institutes will have apprenticeship programmes by March 2021. Also, urban local bodies will provide fresh engineers a job opportunity for one year.

The proposed Budget gives a strong and continued push to online education as a vital medium for accessing quality education, says Prashant Jain, CEO, Oswaal Books, and also adds that the National Education Policy could further invigorate the education sector by giving it a much-needed overhaul.

While others feel allocated fund will lead to better education infrastructure in the country, “The proposed allocation of Rs. 99,300 crores to the education sector for 2020-2021 would surely lead to better infrastructure, attraction of the best teachers and greater research and innovation, especially in the field of science and technology,” according to Minal Anand, founder and CEO, GuruQ, an online tutoring platform.

Additionally, Initiatives such as ‘Study in India’ and ‘Skill India Mission’ will be instrumental in increasing the quality of education in India. Focus on National Education Policy, External Commercial Borrowing and FDI are clearly set to strengthen the overall educational ecosystem, feels Amit Gainda, CEO, Avanse Financial Services.

“The reduction in the limit for NBFCs eligibility for debt recovery under the SARFAESI Act 2002 will be a tailwind for the sector,” he adds.

Focus on women

In her Budget speech, the FM declares that women are a priority, especially pregnant women and lactating women. She said that ‘Beti Bachao, Beti Padhao’ scheme has done exceptionally well, and added that gross enrollment of girls under ‘Beti Bachao Beti Padhao’ is higher than boys. According to the Budget, the gross enrollment of girls is 94.32 per cent in elementary levels, 81.32 per cent in secondary level, and 59.7 per cent in higher secondary level.

Other highlights are:

  • An allocation of Rs. 35,600 crore for nutrition-related programmes in FY2021
  • Rs. 28,600 crore will be allocated in FY2021 for women-linked programmes
  • FM proposes task-force to lower maternal mortality rate

“More than 6 lakh anganwadi workers are equipped to upload status of more than 10 crore households. This scale is unprecedented. Overall, there are imperatives to lower maternal mortality rates.”

FM Nirmala Siitharaman

Despite some women-centric measures, women entrepreneurs are not much delighted as they think there is not much for women in the Budget. “Budget 2019-2020 did not have much to offer to the Indian women, but the allotment of Rs. 28,600 crore for women-centric programmes in FY2021 which will be deployed for schemes like ‘Beti Bachao, Beti Padhao’, Mahila E-Haat, working women hostel, Mahila Police Volunteer, NIRBHAYA, SWADHAR Greh and other such schemes – will encourage women to come out, educate themselves and become independent. This will increase women workforce in the country,” expresses Sadiya Khan, founder of a PR and digital marketing firm, Akund Communications.

Increase in healthcare budget. Middle-class to feel the brunt
  • Rs. 69,000 crore allocated for the health sector. PM Jan Arogya Yojana will get Rs. 6,400 crore under it
  • Mission Indradhanush has been extended to cover new diseases and new vaccines. Fit India is part of it
  • Viability gap funding window proposed for setting up hospitals under PM Jan Arogya Yojna in PPP Mode
  • TB Harega, Desh Jeetega campaign to be strengthened to end TB by 2025
  • Jan Aushadhi Kendra Scheme to be expanded by 2024

Mamta Carroll, VP and regional director, Asia, Smile Train, a training provider to local medical professionals, comments, “We are deeply appreciative of the increase in the national healthcare budget by the government. This includes operationalizing hospitals in areas not covered by Ayushman Bharat, besides more medical colleges. Also schemes like the Poshan Abhiyan which empower the most marginalized with requisite nutrition and the ability to monitor it. All of this has a direct and very positive bearing on our national human capital.”

However, Piyush Jain, co-founder and CEO of ImpactGuru.com feels the middle-class patients suffer the brunt, as an average health insurance cover is only Rs. 5 lakhs. “70% of the middle-class population in India is un-insured. Out of those insured, most of them are under-insured. Only 33 million, out of a country of 1.3 billion pay for health insurance on their own. Out of pocket health expenses in India is 3x the global average. With 44 per cent of the insurance claims paid via reimbursement, there is an additional US$ 2 billion funding gap even for insured patients. Given the increased cost of secondary and tertiary healthcare in India rising at 20 per cent CAGR, a Rs. 5 lakhs coverage is insufficient,” he adds.

What’s in it for Startups
  • Startups with turnover up to Rs. 100 crore to enjoy 100 per cent deductions for three consecutive assessment years out of 10 years
  • Tax payment on ESOPs deferred

“The Hon’ FM has tried to create a level playing field by going to markets for fundraising rather than through the tax route. We are happy that e-commerce was today defined for the first time in the Budget and we look forward to policy initiatives on new-age business formats,” says Rajan Sharma, founder and CEO, excess2sell.com.

Imarticus founder Nikhil Barshikar and Wealthy co-founder Aditya Agarwal believe taxation of ESOP for employees that has been one of the top demands and will be a boon in the start-up ecosystem. “It is commendable that ESOPs will only be taxed on liquidation as opposed to exercise. This will serve as a lucrative incentive that helps attract and retain talent in our space,” Agarwal quips.

All in all, the industry is excited about the revised income tax structure as it indicates a higher disposable income in the hands of the common man. “This could prove to be positive in terms of investments and could potentially boost the capital market,” Basavaraj Puttappa, founder and CEO, Zeva Astras, concludes.

Later, in a televised address after the budget, Prime Minister Narendra Modi said that the Budget 2020 has vision and action and the new reforms announced by Finance Minister Nirmala Sitharaman will give a push to the economy.

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