INTERIM BUDGET 2019-20 FOR UPSC-CSE

ANALYSIS
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 BUDGET ANALYSIS INDEX
SL. NO. Section

1 Introduction

2 State of the Economy

3 ★Important
Agriculture
4 Social & labour welfare ★Important
5 Technology

6 MSMEs and Traders

7 Defence

8 Infrastructure development

9 Tax Proposals
10 Annual Financial Statement ★Most Important

11 Vision for India of 2030

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 Introduction

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 What exactly is a budget?
• The budget  can be defined as the most comprehensive  report of the government’s
finances  in which  revenues from all the sources  and  outlays for all activities  are
consolidated.
• In simple terms, the budget is an annual financial statement of the revenue and expenditure
of a government.
Budget in the Indian Constitution
• The term ‘Budget’ is not mentioned in the Indian Constitution; the corresponding term
used is ‘Annual Financial Statement’ (article 112).
• Article 112: President shall, in respect of every financial year, cause to be laid before
Parliament, Annual Financial Statement.
What are the constitutional requirements which make Budget necessary?
• Article 265: provides that ‘no tax shall be levied or collected except by authority of law’. [ie.
Taxation needs the approval of Parliament.]-> Finance bill ©amitbgl
• Article 266: provides that ‘no expenditure can be incurred except with the authorisation of
the Legislature’ [ie. Expenditure needs the approval of Parliament.]
• Article 114 (3): no amount can be withdrawn from the Consolidated Fund without the
enactment of a law (appropriation bill).
Vote on Account
• Vote on Account is a grant in advance to enable the government to carry on until the voting
of demands for grants and the passing of the Appropriation Bill and Finance Bill.[Article
116(2)]
• This enables the government to fund its expenses for a short period of time or until a full-
budget is passed.  As a convention, a vote-on-account is treated as a formal matter and
passed by Lok Sabha without discussion.
• Normally, the Vote on Account is taken for two months only. The sum of the grant would be
equivalent to one-sixth of the estimated expenditure for the entire year under various
demands for grants.
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• During election year or when it is anticipated that the main Demands and Appropriation
Bill will take longer time than two months, the Vote on Account may be granted for a
period exceeding two months.
Difference between Full Budget and Vote on Account
• Full Budget deals with both expenditure and revenue side but Vote-on-account deals
only with the expenditure side of the government’s budget.
• The vote-on-account is normally valid for two months  but a full budget is valid for 12
months (a financial year).
• As a convention, a vote-on-account is treated as a formal matter and passed by Lok
Sabha without discussion. But passing for budget happens only after discussions and
voting on demand for grants.
• A vote-on-account cannot alter direct taxes since they need to be passed through a
finance bill. Under the regular Budget, fresh taxes may be imposed and old ones may go.
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 What is an interim budget then?
• An interim budget in all practical sense is a full budget but made by the government
during the last year of its term – ie. just before the election. An interim Budget is a
complete set of accounts, including both expenditure and receipts. But it may not
contain big policy proposals.
Is it mandatory for the government to present vote on account instead of a full budget
in an election year?
• It is not mandatory for the government to present a vote on account in an election year.
• Though the convention is to present an interim budget and get the fund required for
spending via the vote on account route, the government (if it wishes so) can even go for
a Full Budget and get the appropriation bills passed to get the finances.
• However, during an election year,  the ruling government generally opts for a vote-on-
account or interim budget instead of a full budget.
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 State of the Economy

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• From being the 11th largest economy in the world in 2013-14, we are today the 6th
largest economy in the world.
• brought down average inflation to 4.6%.The average rate of inflation during
2009-2014 was a backbreaking 10.1%.
• From the high of almost 6% seven years ago, the fiscal deficit has been brought
down to 3.4% in 2018-19 RE.The current account deficit (CAD), against a high of
5.6% six years ago, is likely to be only 2.5% of GDP this year.
• Fiscal consolidation- contained the fiscal deficit notwithstanding the 14th Finance
Commission's recommendations increasing the share of the States from 32% to 42%
in central taxes.
• Foreign Direct Investment (FDI) during the last 5 years - as much as $239 billion.

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 Agriculture

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 1.Pradhan Mantri KIsan SAmman Nidhi (PM-KISAN)-Direct income support scheme
• Under this programme, vulnerable landholding farmer families, having cultivable land
upto 2 hectares, will be provided direct income support at the rate of ₹6,000 per year.
• This income support will be transferred directly into the bank accounts of beneficiary
farmers, in three equal instalments of ₹2,000 each.
• This programme will be funded by Government of India. Around 12 crore small and
marginal farmer families are expected to benefit from this.
• The programme would be made effective from 1st December 2018 and the first
instalment for the period upto 31st March 2019 would be paid during this year itself.
• This programme will entail an annual expenditure of ₹75,000 crore.
★Farmers who own <1 hectare of land are “marginal” and those who own between 1
and 2 hectares of land are “small”.
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 Criticism of PM-KISAN
• It must be seen that this Rs 72,000 crore as direct income support to farmers is nowhere near
the annual loss of about Rs 2,65,000 crore that farmers have been suffering in recent years
because of the low prices they have received due to restrictive marketing and trade policies. 
• It excludes tenant farmers and landless Labour. Even if it did include them, it would have
been challenging to identify each one and quantify their number.
• At 500 per month, it will amount to less than one fIfth of an average household’s in come. Per
annum, it’s peanuts. Amount offered to small and marginal farmers is lower than what is
being provided by the governments of Telangana and Odisha.
‣ The Rythu Bandhu scheme- of Telangana The scheme offers a financial help of ₹8,000 per
year to each farmer (two crops). There is no cap on the number of acres, and most of the
farmers are small and marginal
‣ The Krushak Assistance for Livelihood and Income Augmentation (KALIA) scheme- of
Odisha offers direct benefit cash transfer of 25,000 for a farm family over five seasons to
small and marginal farmers. [28th Jan DNA for more detail] ©amitbgl
 is ‘direct benefit transfer’ a way for forward?- Analysis
• For the last 40 years, India has followed a misguided policy for alleviating poverty or for
increasing food production.
• We have followed the old-fashioned corrupt way — food procurement, food distribution via
the Food Corporation of India to ration shops from which 75 per cent of the population can
access rice and wheat at Re 1 and Rs 2 per kg. Along the way, about 50 per cent of the food
that is meant to be distributed to the poor and lower middle class disappears into thin air —
that is, into corrupt sinks. The amount of this corruption — Rs 1 lakh crore.
• By introducing Direct Benefit Transfer (DBT) to the poor farmer, the government appears to
have taken the first steps towards dismantling the 40-year-old corrupt policy of food
procurement and distribution. And a highly inequitable one as well.
• By raising the minimum support prices (MSP) like this and as previous governments have
done, only the rich, upper-class farmers are really helped.
• Supply and demand determine the price, not the diktat of a bureaucrat or a left-intellectual,
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• That is where a negative income tax first mooted by Milton Friedman in the late 1950s
comes in. DBT is one version of negative income tax.
‣ In economics, a negative income tax is a welfare system within an income tax where
people earning below a certain amount receive supplemental pay from the government
instead of paying taxes to the government. Such a system has been discussed by
economists but never fully implemented.
• Food subsidies and MGNREGA are costing the government more than 2.2 lakh crore,
and a sizeable part of this is either lost in leakages or is not utilised productively.
• Similarly, fertiliser subsidies can also be made through direct income support to
farmers.Gradually, the states can be encouraged to put even power subsidy through
direct income transfer and charge the market price for power, recovering at least its cost
of supply.
• These can then be fundamental reforms, switching from the price policy approach to
income policy approach, for helping the small and marginal farmers and poor consumers.
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 2.Animal Husbandry and Fisheries sector
• Increased the allocation for Rashtriya Gokul Mission to Rs.750 crore in the current year
itself
• Setting up of "Rashtriya Kamdhenu Aayog" to upscale sustainable genetic up-gradation
of cow resources and to enhance production and productivity of cows.The Aayog will
also look after effective implementation of laws and welfare schemes for cows.
• India is the second largest fish producing nation after China in the world accounting for
6.3% of global production, registering an average annual growth of more than 7% in
recent years.
• The Blue revolution launched by India has proved to be quite successful.
• The sector provides livelihood to about 1.45 crore people at the primary level. To
provide sustained and focused attention towards development of this sector,
Government has decided to create a separate Department of Fisheries.
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 Rashtriya Gokul Mission
• The RGM was launched in December 2014 with an outlay of 500 crore (2014-15 to 2016--
2017) for developing and conserving indigenous breeds through selective breeding and
genetically upgrading ‘nondescript’ bovine population.
• The RGM aims to develop ‘Gokul Gram’ care centres for indigenous breeds of high
“genetic merit” as well as other lesser breeds.
• Gokul Grams will be established in: i) the native breeding tracts and ii) near metropolitan
cities for housing the urban cattle.
• Gokul Gram will act as Centres for development of Indigenous Breeds and a dependable
source for supply of high genetic breeding stock to the farmers in the breeding tract.
• The objective is to get native breeds to produce more milk, be more fecund, and to raise
the quality of Indian cows and bulls to eventually outdo Jerseys and Holsteins.
★Cow slaughter and the Constitution-Article 48[DPSP]
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 Issues in the reforms taken by govt in animal husbandry and fisheries
• Funding for cows through the RGM and the Rashtriya Kamdhenu Ayog is good. But
on the ground, farmers are busy chasing the stray cattle from their fields and would
have been happier to get a subsidy for fencing for farm fields.
• The RGM doesn't look at ageing and unproductive cattle, posing a problem for
farmers.
• It will take years before any of these schemes can deliver.
• Increasing milk production, without its pricing being competitive and remunerative to
farmers, may not do much benefit to farmers.
• Budget documents show that the Department only managed to spend 187.73 crore
under the scheme in 2017-18, although Gopal Ratna and Kamdhenu awards were
instituted for breeders since that year, and 43 winners have been chosen.
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 3.Interest subvention to the farmers
• In the last Budget, Government announced the facility of extension of Kisan Credit Card
scheme (KCC) to Animal Husbandry and Fisheries farmers.
• Now Govt proposed to provide the benefit of 2% interest subvention to the farmers pursuing
the activities of animal husbandry and fisheries, who avail loan through Kisan Credit Card.
• Further, in case of timely repayment of loan, they will also get an additional 3% interest
subvention.
In case of natural calamities, strike
• Presently, the crop loans are rescheduled for such affected farmers and they get benefit of
interest subvention of 2% only for the first year of the rescheduled loan.
• Government has now decided that all farmers affected by severe natural calamities, where
assistance is provided from National Disaster Relief Fund (NDRF), will be provided the benefit
of interest subvention of 2% and prompt repayment incentive of 3% for the entire period of
reschedulement of their loans.
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 Issues in Interest subvention to the farmers
• One had hoped that interest subvention would be extended for farmers’ term loans.
• Income-tax benefits should have been extended to animal husbandry and fisheries by
classifying them as agricultural income.These measures were overlooked.
• The enhanced interest subvention only leads to diversion of funds from agriculture to non-
agriculture uses.
• There is ample evidence that in some states agri-credit is even more than the value of agri-
output! So, this scheme of interest subvention needs to be reviewed.
Alternatives to interest subvention
• The real need is to expand the reach of farmers to institutional credit.
• The Kisan Credit Card (KCC) was an innovative policy of the Vajpayee government, but the
latest survey of NABARD on financial inclusion (2015-16) shows that only about 10 per cent
of farmers are using these cards. One needs to understand the constraints and find solutions
to expand and deepen its coverage.
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 Social & labour welfare

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 1.Pradhan Mantri Shram-Yogi Maandhan
• Eligibility- a mega pension yojana for the unorganised sector workers with monthly
income upto Rs`15,000.
• Benefit-provide them an assured monthly pension of Rs. 3,000 from the age of 60 years
• How?-An unorganised sector worker joining pension yojana at the age of 29 years will
have to contribute only Rs.100 per month till the age of 60 years. worker joining the
pension yojana at 18 years, will have to contribute as little as Rs.55 per month only.
• The Government will deposit equal matching share in the pension account of the
worker every month.
• It is expected that at least 10 crore labourers and workers in the unorganised sector will
avail the benefit
• Fund-A sum of Rs`500 crore has been allocated for the Scheme.
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 Chellenges
• A Pension scheme for informal workers is warranted. But do we have the income data
to ascertain informal workers earning less than Rs. 15,000 a month?
• Income cap on pension scheme may leave out urban poor- domestic workers in metro.
Other similar schemes
• The government is already implementing a similar scheme known as Atal Pension
Yojana.
Atal Pension Yojana
‣ Under the APY, guaranteed minimum pension of Rs. 1,000/-, 2,000/-, 3,000/-, 4,000
and 5,000/- per month will be given at the age of 60 years depending on the
contributions by the subscribers.
‣ Even though, it is targeted at the unorganised workers, it is open to all citizens in the
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• Also, the Budget documents show that an existing pension scheme, which already
benefits more than 3 crore poor people who are senior citizens, disabled or widows,
has had its allocation slashed.
• The National Social Assistance Programme (NSAP), a pension scheme administered
by the Ministry of Rural Development, had originally been allocated 9,975 crore in the
201819 Budget.
• For 2019-20, the scheme’s allocation has been cut to 9,200 crore, a drop of 775 crore.
• The National Social Assistance Programme (NSAP) is a Centrally Sponsored Scheme
of the Government of India that provides financial assistance to the elderly, widows
and persons with disabilities in the form of social pensions.

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 2.The condition of the De-notified, Nomadic and Semi- Nomadic communities
• The condition of the De-notified, Nomadic and Semi- Nomadic communities merits special
attention. These communities are hard to reach, less visible, and therefore, frequently left out.
• The Nomadic and Semi- Nomadic communities move from place to place in search of a
livelihood.
• Denotified tribes are those that were notified under the Criminal Tribes Acts enforced during
British Rule, whereby entire populations were branded criminals by birth. In 1952, the Act was
repealed and the communities were denotified.
• A Committee under NITI Aayog will be set up to complete the task of identifying De-notified,
Nomadic and Semi- Nomadic communities not yet formally classified.
• Government will also set up a Welfare Development Board under the Ministry of Social
Justice and Empowerment specifically for the purpose of implementing welfare and
development programmes for De-notified, Nomadic and Semi-Nomadic communities.
• The Board shall ensure that special strategies are designed and implemented to serve these
hard-to-reach communities.
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• According to sources, the Home Ministry too is expected to soon repeal the Habitual
Offenders Act while the issue of setting up a permanent Commission for DNT/NT/
SNT is also under consideration.
• The Renke Commission and the Idate Commission have done commendable work to
identify and list these communities.
• As per the report prepared by the National Commission on DNT, NT, SNT headed by
Bhiku Ramji Idate, over 260 extremely marginalised communities have never been
identified or included in any of the reserved categories. This accounts for 35 per cent
of the DNT, 64 per cent of NT, and one per cent of SNT population.
Bhiku Ramji Idate Commission (2018) recommendations
1.A permanent commission for Denotified, Semi Nomadic, and Nomadic Tribes should
have a prominent community leader as its chairperson, and a senior Union
government bureaucrat, an anthropologist, and a sociologist as members.
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2.Granting Constitutional protection to these communities under a separate third schedule
after Scheduled Castes and Scheduled Tribes, making them eligible for reservation, and
extending the protective cover of Prevention of Atrocities Act to them.
• There is very little known about many of these communities and the issue of their exclusion
has also come up before the Justice Rohini Commission for OBC sub-categorisation.
• Following the June 2008 Balkrishna Renke Commission report, for the first time, two
schemes were implemented starting 2014-15, namely pre- and post-matric scholarships
and construction of hostels for DNT students. However, significant recommendations
remained unimplemented.
Balkrishna Renke Commission report recommendations
1.These include extending 10 per cent reservation in jobs and education to these
communities.
2.Seats may be reserved in Block/Taluka Panchayats and Zila Pandhayats/Zila Parishads, and
the Urban Local Bodies for DNTs wherever there population is concentrated.
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 3.The Aspirational Districts Programme
• It is providing targeted development to the 115 most backward districts of the country.
• The programme has achieved notable results with improved performance on all indicators -
health and nutrition, education, agriculture and water resources, financial inclusion and skill
development.
• Implemented by NITI Aayog.
• Convergence of central and state schemes. Collaboration of central, state level
‘Prabhari’ (in-charge) officers and district collectors Competition among districts
• The states are the main drivers in the programme.
4.Miscellaneous
• 10% reservation in educational institutions and Government services for poors. In these
institutions, around 25% extra seats (approximately 2 lakh) will be provided so that, there is
no shortfall of presently available/reserved seats for any class.
• Higher Education Financing Agency(HEFA)? ( write in comment section ) ©amitbgl
• There are 21 AIIMS operating or being established in the country presently. 14 of
these 21 AIIIMS have been announced since 2014. Govt announced setting up of
new the 22nd AIIMS in Haryana.
Allocation for MGNREGA reduced for next year
• The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
scheme was allocated only 60,000 crore for the next financial year, slightly lower than
its revised estimate of 61,084 crore for the current year.
• By the end of the 2018, the scheme had already exhausted 99% of its funding and
had a negative net balance of 4,413 crore according to its financial statement on
February 1.
Self read
• The Pradhan Mantri Gram Sadak Yojana;'Saubhagya Yojna’;Ayushman Bharat;Pradhan
Mantri Matru Vandana Yojana
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 Technology

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• In order to take the benefits of Artificial Intelligence and related technologies to the
people, a National Programme on 'Artificial Intelligence' has been envisaged by
Government, tied in to an existing programme the National Mission on
Interdisciplinary CyberPhysical Systems (NM ICPS).
• This would be catalysed by the establishment of the National Centre on Artificial
Intelligence as a hub along with Centres of Excellence. Nine priority areas have been
identified.
• A National Artificial Intelligence portal will also be developed soon.
The National Mission on Interdisciplinary CyberPhysical Systems (NM ICPS)
• Implemented by Department of Science &Technology at a total outlay of Rs. 3660
crore for a period of five years.
• NM-ICPS is a Pan India Mission and covers entire gamut of India that includes Central
Ministries, State Governments, Industry and Academia.
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A cyber-physical system is a mechanism that is controlled or monitored by computer-
based algorithms, tightly integrated with the Internet and its users.
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 MSMEs and Traders

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• Recently, a scheme of sanctioning loans upto Rs` 1 crore in 59 minutes has been
launched.
• GST- registered SME units will get 2% interest rebate on incremental loan of Rs` 1
Crore.
• Government e-Marketplace (GeM), created by Government two years ago, has
transformed public procurement by making it fully transparent, inclusive and efficient.
• MSMEs have an opportunity to sell their products through GeM. Transactions of over
Rs` 17,500 crore have taken place, resulting in average savings of 25-28%.
• The GeM platform is now being extended to all CPSEs.
• Government has recently assigned the subject of “promotion of internal trade
including retail trading and welfare of traders, and their employees” to the
Department of Industrial Policy and Promotion, which will now be renamed as the
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• The matters related to internal trade were earlier under the domain of the Ministry of
Consumer Affairs.
Allocation for textiles reduced
• Amended Technology Upgradation Scheme (ATUFS)- Govt would provide credit
linked Capital Investment Subsidy(CIS) to facilitate augmenting of investment,
productivity, quality, employment, exports along with import substitution in the textile
industry. It will also indirectly promote investment in textile machinery.
• Remission of State Levies (ROSL)- to offset indirect taxes levied by states such as
stamp duty, petroleum tax, electricity duty and mandi tax that were embedded in
exports, is provided to textiles exporters. 

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 Defence

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• Our Defence Budget will be crossing Rs` 3,00,000 crore for the first time in 2019-20.
• In real terms the allocation is barely a hike after factoring in inflation and currency
fluctuation.
• This is worrisome scenario as for the much needed military modernisation as several
multibillion dollar defence deals are in the pipeline.

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 Infrastructure development

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• 'UDAAN Scheme', The number of operational airports has crossed 100 with the commissioning
of the Pakyong airport in Sikkim. Arunachal Pradesh came on the air map recently.
• Domestic passenger traffic has doubled during the last five years leading to large number of
jobs being created also.
• 27 kms of highways built each day. The Eastern Peripheral Highway around Delhi or the
Bogibeel rail-cum- road bridge in Assam and Arunachal Pradesh have been completed.
• The flagship programme of Sagarmala along the coastal areas of the country will develop ports
for faster handling of import and export cargo.
• Container freight movement has started on inland waterways from Kolkata to Varanasi.
Government will introduce container cargo movement to the North East as well, by improving
the navigation capacity of the Brahmaputra river.
• Railways-All Unmanned Level Crossings on broad gauge network have been eliminated.
Introduction of the first indigenously developed and manufactured semi high-speed "Vande
Bharat Express"
• Meghalaya, Tripura and Mizoram have come on India’s rail map for the first time. ©amitbgl
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 Operating ratio:- a company's operating expenses
as a percentage of revenue

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• Commitment to promote renewable energy is reflected in setting up the International
Solar Alliance, the first treaty based international inter-governmental organisation
headquartered in India.
• India's import dependence on crude oil and natural gas has been a source of big
concern to Government.
• large number of measures to moderate the increasing demand through usage of bio
fuel and alternate technologies, urgent action is needed to increase hydrocarbon
production to reduce imports.
• A high level Inter-Ministerial Committee, constituted by our Government, has made
several specific recommendations, including transforming the system of bidding for
exploration, changing from revenue sharing to exploration programme for Category II
and III basins. The Government is in the process of implementing these
recommendations.
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 Tax Proposals

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• Individual taxpayers having taxable annual income up to Rs 5 lakhs will get full tax
rebate and therefore will not be required to pay any income tax.
• For salaried persons, Standard Deduction is being raised from the current Rs` 40,000
to Rs` 50,000.
• TDS threshold on interest earned on bank/post office deposits is being raised from
Rs` 10,000 to Rs` 40,000.
• Currently, income tax on notional rent is payable if one has more than one self-
occupied house. An exempt levy of income tax on notional rent on a second self-
occupied house is provided now.
• The benefit of rollover of capital gains under section 54 of the Income Tax Act will be
increased from investment in one residential house to two residential houses for a tax
payer having capital gains up to Rs` 2 crore. This benefit can be availed once in a life
time.
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• Also, for giving impetus to the real estate sector, proposed to extend the period of
exemption from levy of tax on notional rent, on unsold inventories, from one year to
two years, from the end of the year in which the project is completed.
• All returns will be processed in twenty-four hours and refunds issued simultaneously.
• Within the next two years, almost all verification and assessment of returns selected
for scrutiny will be done electronically through anonymised back office, manned by
tax experts and officials, without any personal interface between taxpayers and tax
officers.

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• The tax rate for companies with turnover of up to Rs`250 crore, covering almost 99%
of the companies, was reduced to 25% which was also applicable to new
manufacturing companies without any turnover limits.
• Exemptions from GST for small businesses has been doubled from Rs`20 lakh to Rs`40
lakh.
• Further, small businesses having turnover up to Rs`1.5 crore have been given an
attractive composition scheme wherein they pay only 1% flat rate and have to file one
annual return only.
• Similarly, small service providers with turnover upto Rs`50 lakhs can now opt for
composition scheme and pay GST at 6% instead of 18%.
• In spite of such major rate reductions and relaxations, revenue trends are
encouraging. The average monthly tax collection in the current year is Rs` 97,100
crore per month as compared to Rs` 89,700 crore per month in the first year.
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 Annual Financial Statement

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 The Fiscal Programme for 2019-20 and beyond
Govt response on 0.1 per cent slip in the fiscal deficit
• Fiscal slippage happened because of PM-KISAN Scheme.
• A slight rise in fiscal deficits to fund transfers to farmers does not threaten
macroeconomic stability when in inflation is low and food prices are crashing.
• In fact they are likely to help stabilise prices so that farmers do not cut production in the
next crop cycle.
• As per the FRBM Act, debt-to-GDP ratio was to be brought down to 40 per cent by
2024-25 from 50.1 per cent in 2017-18.
• In the 2018-19 Budget, the government had targeted to reduce its debt-to-GDP ratio to
48.8 per cent in 2018-19, 46.7 per cent in 2019-20 and 44.6 per cent in 2020-21, while
fiscal deficit as a percentage of GDP was targeted to be reduced to 3.3 per cent, 3.1 per
cent and 3 per cent, respectively during the same period.
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 Important findings from fiscal Indicators
• Revenue deficit have been maintained and expenditure on capital account has
increased.
• Since there is decline in international demand, there should be a boost in domestic
demand. Thus, tax rate cut, cash transfer to farmers and scheme to improve demand
in housing sector is all rightly timed and appropriate.
• Budgetary contribution to capital expenditure is at 1.6% of GDP, there is a rise in
internal and extra budgetary resources which are larger than gross budgetary
support.
• Market borrowing by public enterprises used for investment is likely to crowd in
private investment by raising demand.

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 Vision for India of 2030

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 Thank
you for the
trust !

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