BUDGET 20 20 : A Middle Muddle Tinkering

On 1st February like every year Union Budget was presented in the Parliament by Finance Minster NIRMALA SITHARAMAN . It was around 2hr45min long speech and so long that even she couldn’t complete the last 2 pages out of tiredness . SHASHI THAROOR aptly said that “It was as long as a T20 Match , yes but less interesting” . The government as usual was very high on praises and claimed that it will help us revive the economy . While Opposition was as usual doing complete boycott and criticism of budget . Here I will try to present a balanced view .

The two most controversial decisions about INCOME TAX and LIC Sell Off I will talk about the very last . Before that I will discuss the main bold topics of Budget :


Earlier the Deposit Insurance in banks was 1 lakh which is increased to 5 lakh ; ie , deposits upto 1 lakh were completely secured in banks . But after the PMC Bank scam public outrage reached sky high and government has listened to that and worked in that direction by increasing the limit .


The education budget has been slightly increased from 95000 cr. in 2019 to 99300 cr. in 2020 while the Health Budget has been increased from 62000 cr. in 2019 to 69000 cr. in 2020 . Allocations have rose in both sector but still the no.s are not that big as it should be . Other than a new scheme came up regarding Online Degree Course which will be given by top 100 institutions mainly focussing on underprivileged students in which they can not just study but also complete their whole degree online only ; it is indeed a very good initiative . 3000 cr. has been kept for SKILL DEVELOPMENT and NEW EDUCATION POLICY is coming soon . It’s coming soon from 2014 only with as much as 3 HRD ministers … don’t know which Train it is travelling that it’s taking so long .


This time 2.83 lakh cr. has been allocated for this sector . Government has given a 16 point Action Plan to double the farmer’s income by 2024 . So the government is very firm and confident on this target though it seems very difficult to achieve . Also under KUSUM YOJANA farmers will be allocated funds to set up Solar Pumps which is again a very nice idea but will depend on Implementation . Another idea is to transfer fruits and vegetables in REFRIGERATED trains and aeroplanes .


It is further reduced to 22% from 25% and for new manufacturing industries it is only 15% . To reduce Tax Harassment government will amend Companies Act to decriminalize Civil Offences . Also companies having turnover worth 5 crore don’t need to do any Audit . DIVIDEND DISTRIBUTION TAX (DDT) the tax which was extracted on the first share earnings given to shareholders has been shifted towards Investors . Many thought that it is scrapped but it will now be paid by the shareholders who were getting the benefits . It was also a prime reason why Markets crashed so badly .


It has become more difficult to become an NRI after this budget . If one has to send more than 7 lakh abroad , it will be taxed @5% . This is being termed discouraging for those studying abroad . Also a new rule has come ; such NRIs who do not pay taxes in any country will be considered as INDIAN RESIDENTS and will have to pay taxes to GOI . Here one thing should be noted that it is only for those residents who keep on changing their countries to avoid paying taxes anywhere . It’s not for the NRI’s of SAUDI ARABIA and DUBAI who don’t have to pay any taxes there as they are the RESIDENTS there and are not changing countries as I mentioned . Also few days back the definition of NRI changed from one staying outside India for 183 days will now have to stay for 246 days to get that status .


One more thing which was observed in the Budget that almost all consumer goods whose price increased it happened because of rise in IMPORT DUTIES ,ie, the government wants to discourage Imports and give a protection to domestic industries . Reason is also said that government wants to promote MAKE IN INDIA . I have raised this question before also , why do we need to protect our industries even now . One thing very few people would have noticed was that in the ECONOMIC SURVEY it was mentioned that the industries performing the best are the ones Open and the ones who are Closed (still getting Protection) are the ones worst performing . 1480 cr will be allocated in next 4 years to restrict 1.1 lakh cr of technically made clothes .

It should have been crystal clear by now that for getting desired quality we need to face some competition as it brings out the best from you . There is absolutely no point making CHINSES Toys costlier and then making them ourselves , as both input prices and cost of making will be higher for us . It would be better if we purchase Toys from China and instead use that much Manpower in some industry where we specialise and have an ADVANTAGE , as said by RICARDIAN Theory (only for Economics students … HA HA) . Only those industries should remain producing Toys who can compete at the level of China India getting out of RCEP Deal was also a similar blunder . The economic mindset of this Government towards Protectionism is completely out of my level of understanding .


  • App based invoices to be brought in to stop late payments for MSMEs . Start-ups will get 100% discount on their profits 10 years .
  • Smart Meters to help cut costs to be placed in every Household within 3 years
  • 6000km long 12 Highways and 100 new airports are targeted by 2025 .
  • Power sector is poised for reforms that will alleviate stress and boost investment . Anti-Dumping duty is also revoked on PTS Import .
  • Infrastructure is set to get some SOVEREIGN Boost as 100% tax exemption is proposed for SOVEREIGN WEALTH FUNDS (SWF) .
  • 70,250 cr has been allocated for RAILWAYS and capex allocation has been kept at 161,042 cr .
  • Assurance has been given to help out banks from the NPAs which is also mentioned a threat specially in Housing and real estate sector .

Now let me come to the two most controversial decisions of this Budget :


This has been the most talking point of the Budget . But the case is not as simple as being presented . Earlier there were around 70 different kind of exemptions on EPF , PPF , ELSS to get deductions in Income Tax . Under this new slab there is absolutely no such provision . But all the tax payers have one more option of paying taxes at the Old Rates only if they want to avail the earlier exemptions . One one hand rate cuts is being gifted and on the other hand all Reliefs are being taken over .

We have to understand one thing first that only 2% of our population (around 3 crore) people pay Direct Taxes . Also , taxation lead to the majority of SAVING in the economy which is also at a 15 year low (around 17%) . People save because they to pay taxes ; they invest in PPFs , ELSSs they even take Loans just for this purpose . Now just tell me how will anyone come to know whether he is gaining in Old or New scheme without consulting a CA , Can a middle class afford one ?

Imagine for a while a middle class man who last year bought a House at LOAN just for tax saving and he has also invested in PPF and ELSS , other than that he presents school fee receipts of his children to get some more Exemption in Taxes . Now comes this new scheme and after rigrous calculation he comes to know that he will be gaining if he sweeps to the new scheme . So what will he do , Sacrifice all his exemption options . It’s easy to say Yes but for a middle class man with limited income it all matters a lot and if he is not getting exemption on even his children’s Fees and any other genuine Loan on him and if he has to stick with old scheme only just to avail exemptions and incur Loss in REAL terms then this whole idea is DAF and has no point at all . That too when FM repeatedly told that we are bringing a change in Tax structure then it is beyond my understanding why they didn’t went fully for the scheme .


On one hand IDBI Bank is decided to completely sold off to private holders while some shares of LIC , which is one of the most profitable government ventures will also be sold . The Disinvestment target is 2.1 lakh crore of which 12 thousand crore has been arranged in first 6 months . Also , if tax cuts are being done Privatisation will have to take place to maintain Funds . Plans are made to attract private investments for Railways as well .

Before discussing anything , we should know that LIC is the most Non-Transparent investor in stock market . But because it is Unlisted we don’t know anything about it’s Balance Sheet and how , where and what it invested and also where it incurred Loss … listing in stock market brings Transparency . DEEWAN HOUSING is caught and later it’s found out that it was all LIC Money . Also , keep in mind LIC is having a lot of NPAs of over 25000 crore but because of lack of Transparency it’s not known completely . Governments usually uses LIC for manoeuvring stock market and it has been politically used for quite long and if government is ready to list it on stock market and make it Transparent , it is indeed a very good step . Also , all those scared out people … your Funds will ve absolutely safe in LIC and it’s owner is Government only . It will be challenging though to do the Part Sale disinvestment in next few days then it will be a very good reform in my opinion .

This budget saw the biggest stock market crash in 11 years of 1000 points (Investors lost worth 3.6 lakh cr). The main reason why Stock Market crashed is that all sources through which the Money reaches stock market have been hit by this budget . Fiscal Deficit has reached even higher to 3.8% from earlier 3.3% (though it was Exhausted in around 7 months only) . In my opinion it is a dangerous warning bell for Government as it will further lead to rising proces .

Government missed many opportunities in this budget . As many experts were saying to help reviving Auto sector and Real estate sector but only disappointment was seen in both cases . RAGHURAM RAJAN warned that Real Estate is on a Time Bomb and can blast anytime soon if not given relief . I personally was very much looking forward to look at policies aiming at rise in DEMAND and CONSUMPTION which are on a Historic Low . But absolutely nothing sort of that happened . Also in my opinion the main area of focus should have been Human Capital and for that much larger allocations were required in Education and Health .

Mainly we can say that in such a High Economic Recession that we are facing a much more RISKIER budget was required , something which could have helped us out of it . If risk can be taken in a blunder like DEMONETISATION to scramble the economy then some risks are also expected to revive it . This budget just like many others give us many dreams but is STRONGLY lacking the roadmap how will we reach there . As our ex-PM MANMOHAN SINGH said , “So long a Budget I couldn’t get what it meant” . This budget lacks the MUSCLE to fight the slowdown and generate employment . So it is just a Test Match kind of budget (T20 only in speech size) asking for more time in the hope that things get any better with time .

Fancy statements like EXPORT HUBS when your Infrastructure is not in a good shape , doubling farmer’s income without a roadmap and the less we talk of 5 Trillion Economy the better … it’s a Joke now but still mentioned around 10 times . She also said that due to GST implementation there has been a 4% Saving for the public in indirect taxes , but it’s again a baseless statement because if that had been the case why would have our Consumption fell , it should have absorbed that extra saving .

This MODINOMICS is filled with confusion right from the beginning and still it is not sure of what to do to revive our Economy . It has tried to touch all the sectors , there have been some small good ‘TINKERING’ steps but the Big Picture is still missing . My Rating to this Budget is 5 out of 10 . What I fear that the scenario doesn’t get similar to that if last budget when government had to withdraw all proposals of BUDGET 2019 few months later due to serious Economic Recession . So , this was the Budget from the best of my understandings . I wish the government all the best for it’s implementation and let’s juts hope that all it’s positive ideas help our Economy though a little bit only .



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