Union Budget Explained: Boosting consumption by leaving people with higher disposable incomes is the key strategy

Union Finance Minister Nirmala Sitharaman has kept a tight leash on spending despite a sputtering economy, tacitly admitting there is little fiscal space, and settled for a growth rate of just about 6 per cent for 2020-21, assuming an average inflation of about 4 per cent for the year.

Despite a sharp cut in expenditure, necessitated more by falling receipts, the Centre’s fiscal deficit was 0.5 percentage points higher than budgeted for 2019-20 at 3.8 per cent of the GDP. For the next year too, the Budget has curtailed spending across sectors including in flagship schemes, hoping to rein in the deficit at 3.3 per cent of GDP. READ HERE

Finance Minister Nirmala Sitharaman carries the Union Budget 2020 papers in a 'bahi khaata' while leaving her office to present it in the Parliament today. She is accompanied by MoS Finance Anurag Thakur and Chief Economic Advisor Krishnamurthy Subramanian. (Express photo by Praveen Khanna)

Finance Minister Nirmala Sitharaman arrived at the Finance Ministry earlier today ahead of its presentation in the Parliament. (Express photo by Praveen Khanna)

Following last year's tradition, Finance Minister Nirmala Sitharaman, who started a tradition last year by carrying a 'bahi khaata' instead of a leather briefcase for the Budget papers. (Express photo by Praveen Khanna)

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Prime Minister Narendra Modi on Saturday lauded Finance Minister Nirmala Sitharaman and her team, saying the first Budget of the decade showed “vision as well as action”.

“The new reforms announced in the budget will work to speed up our economy, financially empower every citizen of the country and strengthen the foundation of the economy in this decade,” PM Modi said in a video address to the nation. READ HERE

The fine print of the Union Budget for 2020-21 notwithstanding, the central strategy of the government seems to be to boost the disposable incomes of the Indian consumers. Here's why 

In a bid to boost consumption to pull the economy out of the worst slowdown in 11 years, Finance Minister Nirmala Sitharaman, presenting her second Union Budget, announced cuts in personal income tax and extended tax benefits for affordable housing.

Another focus of the Budget was giving a “level-playing field” to domestic manufacturers in a bid to boost Prime Minister Narendra Modi’s ambitious ‘Make in India’ scheme. To encourage domestic companies, Sitharaman announced that customs duty would be raised on a variety of products ranging from tableware and kitchenware to electrical appliances, footwear, furniture, stationery and toys. Read more here

LIC is India’s largest financial institution, and if LIC shares are listed on stock exchanges, it could easily emerge as the country’s top listed company in terms of market valuation, overtaking current leaders Reliance Industries Ltd and Tata Consultancy Services. Read more

Boosting consumption by leaving people with higher disposable incomes is the key strategy. So what was the problem slowing down the economy, and how does the government plan on tackling it via this budget? Read here

The government proposes to set up an Indian Institute of Heritage and Conservation under the Ministry of Culture, and develop five archaeological sites as “iconic sites” with onsite museums in Rakhigarhi (Haryana), Hastinapur (Uttar Pradesh), Sivsagar (Assam), Dholavira (Gujarat) and Adichanallur (Tamil Nadu). Know about these five sites

Finance Minister Nirmala Sitharaman’s Budget 2020 announcements for the salaried class proposes a new tax regime slashing income tax rates and rejigging income tax slabs to ostensibly prune total tax payable by individuals. But the rider: most key exemptions are gone if one were to go for this option: home loan interest, HRA, LTA, health insurance. And standard deduction. Know what are the exemptions here

The insurance cover for bank deposits has been raised to Rs 5 lakh from Rs 1 lakh, Finance Minister Nirmala Sitharaman has announced in her Budget speech. This has been a major talking point in the previous months. The failure of the Punjab and Maharashtra Co-operative (PMC) Bank had reignited the debate on the low level of insurance for deposits held by customers in banks in India. Read our explainer on what this means

LIC is India’s largest financial institution, and if LIC shares are listed on stock exchanges, it could easily emerge as the country’s top listed company in terms of market valuation, overtaking current leaders Reliance Industries Ltd and Tata Consultancy Services. This is because of the insurer’s financials. On a capital base of Rs 5 crore, LIC last reported a valuation surplus — or profit — of Rs 48,436 crore for FY2018, and assets under management of Rs 31.11 lakh crore. Read our explainer here

Finance Minister Nirmala Sitharaman has created history with the longest Budget speech. She has broken her own record of 2 hours, 17 mins. As she crosses 2 hours 30 minutes, she tells the Lok Sabha she has only two pages left...

The Finance Minister has announced the 'Vivaadh sey Vishwas Scheme' for direct tax payers to reduce tax litigations. There are currently 4.83 lakh direct cases pending in various appellate forums. Get complete waiver of interest and penalty by paying dispute amount by March 31, 2020.

Vivaadh sey Vishwas scheme: to reduce tax litigations, 4.83 lakh direct tax cases pending. Pay only dispute amount, get complete waiver of interest and penalty by paying it by March 31, 2020 @IndianExpress

— P Vaidyanathan Iyer (@iyervaidy) February 1, 2020

Sensex has tanked over 650 points, or 1.61 per cent, to 40,067. The broader Nifty is down 225 points, or 1.88 per cent, to 11,773.

Finance Minister Nirmala Sitharaman has proposed 15% tax for income between 7.5 lakh to 10 lakh; 20% tax for income between 10 lakh to 12.5 lakh; 25% tax for income between 12.5 lakh to 15 lakh; 30% tax for income above 15 lakhand no income tax for those with taxable income below Rs 5 lakh. Sitharaman says Rs 40,000 crore per annum will be revenue foregone from new income tax rates. How much income tax you need to pay now? Check slab

Fiscal deficit has been estimated at 3.5 per cent in 2020-21, and revised for the current year upwards to 3.8% from 3.3%. The Budget does not succumb to pressures of expanding fiscal deficit. That should be positive for bond markets.

The government estimates nominal GDP for 2020-21 at 10 per cent. It is lower than the 12 per cent that was projected in 2019-20, which turned out to be only 7.5 per cent. Recalibration of expectations.

Foreign Portfolio Investment (FPI) limits in corporate bonds being raised from 9 per cent to 15 per cent is a major move. That, along with fiscal deficit not being allowed to spiral much, should help prevent domestic interest rates from going up.

The 15th Finance Commission has received gross tax revenues at Rs 22.55 trillion in 2019-20. The Budget estimate for 2020-21 is Rs 24.6 trillion. There is anecdotal, analytical, and other evidence to suggest that this may not be achieved.

The govt has proposed raising the limit of bank deposit insurance by five-fold from Rs one lakh to Rs five lakh. This measure is important in the backdrop of recent default by cooperative lender PMC Bank Steps are also being taken to professionalise cooperative banks. Finance Minister Nirmala Sitharaman says a robust mechanism is in place to monitor the health of banks. "Depositors' money is absolutely safe," she assures.

The 15th Finance Commission, tabled by the FM in Parliament prior to the Union Budget presentation, has recommended keeping the tax devolution share "virtually unchanged" to states to 41 per cent for the year 2020-21 from 42 per cent. The 1 percentage point reduction, though, has been done to account for the reorganisation of the erstwhile state of Jammu and Kashmir.

"We have notionally estimated that the share of the erstwhile state of Jammu & Kashmir would have come to around 0.85 per cent of the divisible pool. We believe that there is a strong case for enhancing this to 1 per cent of the divisible pool to meet the security and the special needs of the Union Territories of Jammu and Kashmir and Ladakh. Since this enhancement has to be met from the Union's resources, we recommend that the aggregate share of states may be reduced by about 1 percentage point to 41 per cent of the divisible pool," the report has said.

The Commission’s report, along with an action taken report, was placed in Parliament. The Commission has earlier submitted its report to the President last December.

The government will develop 100 more airport across the country by 2025 to support its UDAN scheme. Finance Minister Nirmala Sitharaman has allocated Rs 1.7 lakh crore for transportation infrastructure in FY21. Meanwhile, 1,150 trains will run under a public private partnership (PPP) mode, and four stations will be redeveloped by the private sector. More Tejas trains will connect tourist destinations.

In a bid to boost culture and tourism, the government has proposed an allocation of Rs 3,150 crore and Rs 2,500 crore for the Ministries of Culture and Tourism, respectively, Five archaeological sites in Haryana, Uttar Pradesh, Assam, Gujarat and Tamil Nadu will be developed with on-site museums, announces Finance Minister Nirmala Sitharaman. 

Proposed powering of railways through solar farms on land near tracks is projected to be a negative for discoms as it takes lucrative consumers away. The big push for solar power for farming and for fallow lands by extending the Kusum scheme is a positive for the renewable sector.

To harness the explosion of digital technology in the country, the Finance Minister has proposed to bring a policy to build data centre parks across the country. This is in line with the broad policy of the NDA government of encouraging data localisation.

The markets have fallen. The BSE Sensex is trading 88 points lower at 40,634, while the broader Nifty is 102 points lower at 11,932. It's not clear what has triggered the sudden fall. It could be because no concrete proposals have been announced even after one hour of the Finance Minister's Union Budget speech.

Finance Minister Nirmala Sitharaman, in her Budget, has announced corporatisation of all major state owned port trusts and their subsequent listing.

With the vision to make India an export hub, the government has announced a new scheme — Nirvik — which will be offered to exporters to provide faster claims settlement. The scheme, which will be launched in 2020, will help in refund of duties and inputs such as electricity payments for exporters. Each district will have to be developed as an export hub. A total allocation of Rs 27,300 crore for development of industry and commerce in FY21.

Investment clearance cell to be set up for entrepreneurs. Individuals will be offered assistance in funding as well and a portal will be set up for this purpose. The effort to step up entrepreneurship comes amid a growing realisation that Start Up India and other handholding schemes have not taken off as intended.

A new scheme will be announced by the government to encourage domestic manufacturing of mobile phones, electronics and semiconductor boards, Finance Minister Nirmala Sitharaman says while presenting the Union Budget 2020. The details will be announced later.

The government will announce a new education policy soon. Finance Minister Nirmala Sitharaman says the government will take steps to rope in External Commercial Borrowing (ECB) and Foreign Direct Investment (FDI) route to develop higher quality education. ECB are much cheaper than domestically available loans and therefore will reduce the cost of developing such educational projects. The govt has proposed an allocation of Rs 99,300 crore for the education sector and Rs 3,000 crore for skill development in FY21.

In a push to improve water supply and sanitation, the government has proposed Rs 3.6 lakh crore for the Jal Jeevan Mission. This will be used to augment local water resources, desalination projects, water harvesting and renewing older sources in FY21.

There are only 20,000 empanelled hospitals under Health Ministry's Ayushman Bharat Yojana. The government proposes setting up viability gap funding to allow for entry of hospitals into aspirational districts through the PPP model, marking an expansion of capacity. Proceeds from taxation of medical devices to be used to fund this. Districts out of 112 aspirational districts that do not have any empanelled hospitals will be a priority. 

The Sensex at the Bombay Stock Exchange trades flat with a marginal gain of 23 points at 40,747 following the first few Budget announcements by Finance Minister Nirmala Sitharaman. The broader Nifty is trading 67 points lower, or 0.56 per cent, at 11,968.70. For live news on the markets, click here. 

The Union Budget 2020 has announced Krishi Rail, to be implemented by Ministry of Railways, and Krishi Udaan by Ministry of Civil Aviation. These will complement roadways for faster transportation of perishable agricultural goods. While in Railways, refrigerated coaches will be added to Express and Freight trains, the Krishi Udaan scheme will see flights on national and international routes pitching in.

The government will strive to bring ease of living for every citizen, says Sitharaman as she presents the Union Budget 2020. India has uplifted 271 million people out of poverty, she adds.

Nirmala Sitharaman pays tribute to former finance minister the late Arun Jaitley, the architect of the Goods and Services Tax (GST), which she says has been a historic reform. Sitharaman says households have saved 4 per cent on monthly spends after implementation of GST. From April 2020, the government will introduce a simplified return for GST.

Finance Minister Nirmala Sitharaman says the Union Budget 2020 is based on three themes — aspiration, economic development and caring society. 

Finance Minister Nirmala Sitharaman starts off by saying the fundamentals of the Indian economy remain strong. She says the Union Budget 2020 is for boosting income and the purchasing power of the people. Increased spending is likely to give momentum to the economy, which is facing its worst economic slowdown in over a decade. "The people of India have unequivocally given their support to the policies of the Narendra Modi government. People reposed faith in our economic policies. This Budget aims to address aims, aspirations of people," Sitharaman says.

Finance Minister Nirmala Sitharaman has begun presenting the Union Budget 2020. For real-time updates on the Union Budget, follow our live blog. For news on how the markets are reacting to Budget, click here. Will there be any income tax relief? Click here to know.

The process of drafting the budget is not easy. This is especially at a time when almost all sectors, from agriculture to manufacturing to some service sectors, are witnessing a slowdown in economic activity. While some people expect the government to increase expenditure to spur economic growth, others have warned of rising fiscal deficit. So, how is a budget prepared? Read part 1 of our series, 'Explaining the Union Budget 2020' by Deputy Associate Editor Udit Misra.

Fiscal marksmanship essentially refers to the accuracy of the government’s forecast of fiscal parameters such as revenues, expenditures and deficits etc. In other words, if the difference between what the government projected as the likely tax revenues in the Budget and the actual figures a year later is large then it reflects poor fiscal marksmanship. Why does this matter? Read the second part of our series, 'Explaining the Budget', for more.

Every budget needs to explain the outlook on boosting economic growth. In the second part of our series, 'Explaining the Budget', we ask: what can the government do to boost employment in the country? For a while now, it has been suggested that India’s unemployment woes can only be solved by boosting the manufacturing sector. But, why manufacturing? Click to read our explainer.

Here's replugging part four of our series, 'Explaining the Union Budget 2020', by Associate Deputy Editor Udit Misra. As the years rolled by, fiscal deficit has become a key factor to watch out for in every Budget presentation. It is considered the most important marker of a government’s financial health. However, as India's economy has decelerated, there has been pressure on the government to increase spending. Is fiscal deficit holding back India's growth? We explain.

Today, the most important thing to look for in the Union Budget, is nominal GDP growth. It forms the base of all other variables. The other things you can watch out for include fiscal and revenue deficit, an income tax cut and disinvestment targets. In this explainer, we explain why these are important, at a time when growth slowdown is not just sharp but also quite widespread.

As the Union Budget is presented by Finance Minister Nirmala Sitharaman this morning, we will break it down and explain what it means for you. Follow this live blog for an explanation and analysis on Sitharaman's budget, which comes at a time when the economy is fast decelerating. Stay tuned!