Budget-2020-Brief-Note For IAS

Indianeconomy.
net Budget 2020
Indianeconomy.net 1
Indianeconomy.net Budget 2020
Budget 2020
The government will open up vistas for vibrant and dynamic economy with the use
of new technology. It will be a caring society which shall attend the weak, the old and the
vulnerable among its citizens.
During 2014-19, there is a paradigm shift in governance featured by twin focus:
1. Fundamental structural reform and Economic Fundamentals

are strong
2. Inclusive growth. >There is macroeconomic
stability.
Structural reforms – the GST >Inflation has been contained
>Banks are in the cleaning
Goods and Services Tax (GST) – is one historical up process of accumulated
structural reform -the progress of GST: loans
>IBC process provides exit
• GST has been maturing as a tax that is routes to companies
>Several formalisation
integrating the country. processes were initiated.
• GST consolidated numerous taxes and cesses to one tax
• It facilitated formalisation.
• It enhanced efficiency in logistic and transport sectors
• Turnaround time for trucks reduced by 20% due to abolition of check posts
• the dreaded Inspector-Raj has also vanished.
• GST led to significant benefits to MSME from enhanced threshold and composition
limits.
• Effective tax incidence on almost every commodity came down substantially.
• Tax reductions provided an annual tax relief of Rs 1 lakh crores to consumers.
• An average household can save 4% on its monthly spending due to low GST rates.
Challenges of GST in its transition

Budget’s background – two
GST Council made proactive measures to handle the cross cutting developments
(a) Proliferation of
GST system: In the last two years: technologies like analytics,
machine learning, robotics,
• more than 60 lakh new taxpayers were added bioinformatics and Artificial
• about 40 crore returns were filed, Intelligence; and
(b) The number of people in
• 800 crore invoices were uploaded, and
the productive age group i.e.
• 105 crore e-way bills were generated. 15-65 years in India, being at
its highest.
A simplified new return system is being introduced from
April 1, 2020.
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SabkaSaath, SabkaVikas, SabkaVishwas
Welfare schemes are now reaching the beneficiaries at the right time. The government has
speeded up and scaled up the implementation of schemes and programmes. Some of the
steps taken to improve the inclusiveness and efficiency are the following:
• welfare schemes are connected with Direct Benefit Transfer (DBT).

• sanitation and water were provided as basic needs for preventive healthcare.
• healthcare, through Ayushman Bharat.
• clean energy through Ujjwala and solar power.
• financial inclusion, credit support, insurance protection to vulnerable sections and
pension scheme.
• digital penetration with broadband and UPI.
• Affordable Housing for all through PMAY.
Milestones:
India achieved several milestones that are globally recognised and benchmarked
• India achieved average growth of 7.4% with an average inflation rate of 4.5%.
• Between 2006-16, India was able to raise 271 million people out of poverty.
• India is now the fifth largest economy of the world. .
• FDI into the country increased to US$ 284billion during 2014-19.
• Debt of the central government reduced to 48.7% of GDP.
A combination that makes

Digital revolution places India in a unique special for contemporary
leadership position India:
1. Shrinking Globalisation
In this digital revolution, India shall aim: and
2. Debate on the efficacy
• To achieve seamless delivery of services through of monetary policy.
Digital governance
• To improve physical quality of life through National Infrastructure Pipeline
• Risk mitigation through Disaster Resilience

Three themes of the Budget –
• Social security through Pension and Insurance the three flowers in the
bouquet
penetration.
(1) Aspirational India,
Each one of these initiatives and their components
(2) Economic Development and
would be bench-marked to international standards and
(3) Caring society
the indices would be announced soon.
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Budget’s three Prominent Themes
The three themes – Aspirational India, Economic Development and Caring society are the
flowers in the bouquet of Ease of Living envisaged by the Prime Minister.
1. Aspirational India: all sections of the society seek better standards of living, with access
to health, education and better jobs.
2. Economic development:
• Development for all, as envisaged under “SabkaSaath, SabkaVikas, SabkaVishwas”.

• This necessitates reforms across different areas of the economy.
• Similarly, there should be more space for the private sector.
• Besides, there would be higher productivity and greater efficiency.
3. The Caring Society that is both humane and compassionate. Antyodaya is an article of
faith.
1. Aspirational India
Aspirational India covers programmes and plans related to three socio-economic areas:
(1) Agriculture, Irrigation and Rural Development
(2) Wellness, Water and Sanitation and
(3) Education and Skills
(1) Agriculture, Irrigation and Rural Development (First element of Aspirational
India)
Government is committed to the goal of doubling farmers’ incomes by 2022. Following

efforts have helped to realise this goal.
• Energy sovereignty through KUSUM

• Input sovereignty through Paramparagat Krishi Vikas Yojana.
• Insurance cover has been given to 6.11 crore farmers through PM Fasal Bima Yojana
• Pulse cultivation and micro irrigation through Krishi Sinchai Yojana
• Supplementary income through PM KISAN
• Connectivity through PMGSY
Farmer’s prosperity by making farming competitive- following actions are needed on this
regard:
• Liberalization of farm markets

• Removal of distortions in farm and livestock markets
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• Higher investment to purchase farm produce, expansion of logistics and provision

of agri-services.
• Support for farm-based activities like livestock, apiary, and fisheries
• Integrated solutions covering storage, financing, processing and marketing should
be made.
• Adoption of sustainable cropping patterns and

The 16-point Action Plan for Agriculture:
bringing in more technology. Areas
1. Encouraging States to adopt model laws
The 16-point action plan for agricultural sector issued by the Centre
development 2. Water Stress
3. Solar pump sets to farmers – PM KUSUM
Budget proposes a 16-point action plan to promote 4. Balanced fertiliser use:
5. Agricultural Warehousing
agricultural production and welfare. 6. Village Storage Scheme by SHGs:
7. Kisan Rail
1. Encouraging State governments who 8. Krishi Udaan
9. Horticulture: One product one district
implements model laws issued by the Centre.
scheme
The model laws are: 10. Integrating Farming System
11. e-NWR integration with e-NAM
(a) Model Agricultural Land Leasing Act, 2016 12. Agricultural credit
13. Animal Husbandry
(b) Model Agricultural Produce and Livestock 14. Blue Economy: Marine Fisheries
15. Fisheries
Marketing (Promotion and Facilitation) Act, 16. Deen Dayal Antyodaya Yojana
2017.
(c)Model Agricultural Produce and Livestock Contract Farming and Services

(Promotion and Facilitation) Act, 2018.
2. Water Stress: Government will undertake comprehensive measures for one hundred
water stressed districts.
3. Solar pump sets to farmers: PM KUSUM (Pradhan Mantri Kisan Urja Suraksha
Utthan Mahabhiyan)
The scheme removed farmers’ dependence on diesel and kerosene and linked pump sets
to solar energy. The scheme will be expanded to provide:
• 20 lakh farmers for setting up stand-alone solar pumps.

• 15 lakh farmers will be helped to solarise their grid-connected pump sets.
• farmers to set up solar power generation capacity on their fallow/barren lands and
to sell it to the grid would be operationalized.
4. Balanced use of fertilisers: Government will encourage balanced use of all kinds of
fertilizers including the traditional organic and other innovative fertilizers.
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5. Agricultural Warehousing: India has an estimated capacity of 162 million MT of agri-

warehousing, cold storage, reefer van facilities etc. Budget proposals:
• NABARD will map and geo-tag

them.
• More warehousing will be
constructed abiding with
Warehouse Development and
Regulatory Authority (WDRA)
norms.
• Viability Gap Funding will be
provided for setting up of efficient
warehouses at the block/taluk level.
• States should provide land for
constructing new warehouses on
PPP mode.
• Food Corporation of India (FCI) and Central Warehousing Corporation (CWC) shall
undertake such warehouse building on their land.
6. Village Storage Scheme by SHGs
• Village Storage scheme to be run by the SHGs will act as a backward linkage for
storing agricultural produce.
• Doing so, women, SHGs shall regain their position as “Dhaanya Lakshmi”.
7. Kisan Rail – national cold supply chain by Indian Railways:
Indian Railways will set up a “Kisan Rail as a national cold supply chain for perishables,
including milk, meat and fish.
This will be done on PPP mode.
North East and tribal districts will get benefit from such a logistic support.
8. Krishi Udaan: will be launched by the Ministry of Civil Aviation on international and
national routes. This will immensely help to improve value realisation especially in North-
East and tribal districts.
9. Horticulture: One product one district scheme
• Horticulture sector with an output of 311million MT exceeds production of food

grains.
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• For better marketing and export, States will be encouraged to follow a cluster
approach to focus on “one product one district”.
10. Integrating farming system
• Integrated farming systems in rainfed areas shall be expanded.

• Multi-tier cropping, beekeeping, solar pumps, solar energy production in non-
cropping season will be added.
• Zero-Budget Natural Farming (July 2019 budget) shall also be included.
• The portal on “jaivikkheti” – online national organic products market will also be
strengthened.
11. e-NWR will be integrated with e-NAM
• Financing on Negotiable Warehousing Receipts (e-NWR) has crossed Rs 6000 crore.

• E-NWR will be integrated with e-NAM.
12. Agricultural credit
• NBFCs and cooperatives are active in the agriculture credit space.

• NABARD re-finance scheme will be further expanded.
• Agriculture credit target for 2020-21 has been set at Rs 15 lakh crore.
• All eligible beneficiaries of PM-KISAN will be covered under the KCC scheme.
13. Animal Husbandry
• Major livestock diseases like Foot and Mouth disease, brucellosis in cattle, peste des
petits ruminants (PPR) in sheep and goat will be eliminated by 2025.
• Coverage of artificial insemination shall be increased from the present 30% to 70%.
• MNREGS would be dovetailed to develop fodder farms.
• Milk processing capacity will be doubled from 53.5 million MT to 108 million MT by
2025.
14. Blue Economy: Marine Fisheries

Fund allocation for 16-point Action Plan
• A framework for development,
Agriculture, Irrigation & Rs 1.60 lakh crore
management and conservation of allied activities
marine fishery resources will be Rural development Rs 1.23 lakh crores
&Panchayati Raj
designed.
15. Fisheries
• Fish production will be to 200 lakh tonnes by 2022-23,

• Growing of algae, sea-weed and cage Culture will also be promoted.
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• Youth will be encouraged to participate in fishery extension through 3477

SagarMitras and 500 Fish Farmer Producer Organisations.
• Fishery exports will be enhanced to Rs 1 lakh crore by 2024-25.
16. Deen Dayal Antyodaya Yojana
• Under the scheme, for alleviation of poverty, 58 lakh SHGs have been mobilised.
• More SHGs will be participated.
(2) Wellness, Water and Sanitation (second element of Aspirational India)
The Government has a holistic vision of Three Elements of Aspirational India

(1) Agriculture, Irrigation and Rural
healthcare that translates into wellness of the Development
(2) Wellness, Water and Sanitation
citizen. (3) Education and Skills
• Mission Indradhanush has been expanded to cover 12 such diseases, including

five new vaccines.
• FIT India movement is a vital part of fight against Non communicable diseases
coming out of lifestyle issues
• Jal Jeevan Mission is a very focused safe water
• Swachch Bharat Mission is a comprehensive sanitation program
• PM Jan Arogya Yojana (PMJAY) networks more than 20000 empanelled
hospitals and more Tier-2 and Tier-3 cities are to be covered under this
scheme.
Hospitals through PPP with viability gap funding
• More hospitals to be created through PPP mode with Viability Gap Funding
• In the first phase, Aspirational Districts where presently there are no Ayushman
empanelled hospitals will be selected. Budgets’ health sector allocation
Allocation to the health sector is Rs 69,000
• This would also provide large scale employment crores including Rs 6400 crores for Prime
opportunities to youth. Minister Jan Arogya Yojana (PMJAY)
• Proceeds from taxes (for VG funding) on medical devices would be used to build
hospitals.
Use of AI and Machine learning in Ayushman Bharat
• Using machine learning and AI; Ayushman Bharat scheme can target disease with
supportive Preventive regime.
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TB Harega Desh Jeetega campaign: Commitment to end Tuberculosis by 2025 will be

strengthened.
Jan Aushadhi Kendra Scheme: will be expanded to all districts offering 2000 medicines
and 300 surgicals by 2024.
ODF Plus
• Government is committed to ODF Plus to sustain ODF behaviour.

• Efforts will be made for liquid and grey water management.
• Focus would also be on Solid waste collection, source segregation and processing.
Jal Jeevan Mission
• The scheme aims to provide piped water supply to all households

• Government has approved Rs 3.60 lakh crore for this Mission.
• The scheme also places emphasis on augmenting local water sources, recharging
existing sources and will promote water harvesting and de-salination.
• Cities with over a million population will be encouraged to meeting this objective
during the current year itself.
• For 2020-21, Rs 11,500 crore is allocated for this scheme.
3. Education and Skills (Third element of Aspirational India)
Education and Skills is the third element of Three Elements of Aspirational India
(1) Agriculture, Irrigation and Rural
Aspirational India. Development
(2) Wellness, Water and Sanitation
New Education Policy (3) Education and Skills
• By 2030, India is set to have the largest working-age population in the world.
• Not just literacy but they need both job and life skills.
• Discussions were conducted with State Education Ministries, Members of Parliament
and other stakeholders about Education policy.
• The New Education Policy will be announced soon.
FDI and ECBs will be utilised in the education sector
• Our education system needs greater inflow of finance to attract talented teachers,
innovate and build better labs.
• Fund sources like External Commercial Borrowings and FDI will be utilised to deliver
higher quality education.
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Apprenticeship to be embedded with degree and diploma courses of 150 educational

institutions
• Employability of general stream students (vis-à-vis services or technology stream)

should be improved.
• About 150 higher educational institutions will start apprenticeship embedded
degree/diploma courses by March 2021.
Internship for fresh engineers
• Urban local bodies across the country would provide internship opportunities to
fresh engineers for a period up to one year.
Online education programme for degree level students
• To provide quality education to students of deprived sections and those who do not
have access to higher education, full-fledged online education programme will be
started at the degree level.
• This shall be offered only by institutions who are ranked within top 100 in the
National Institutional Ranking framework.
• Initially, only a few such institutions would be asked to offer such programmes.
Ind-SAT
• This initiative is to make India as a preferred destination for higher education.

• For this under the “Study in India” programme, Ind-SAT is proposed to be held in
Asian and African countries.
• It shall be used for benchmarking foreign candidates who receive scholarships for
studying in Indian higher education centres.
National Police University and National Forensic

Allocation for Education and Skill
Science University development
• A National Police University and a National Education Rs 99,300 crore

Forensic Science University are proposed in
Skill Rs 3000 crores
the domain of policing science, forensic Development
science, cyber-forensics etc.
There is shortage of qualified medical doctors and to solve this:
(a) A medical college will be attached to an existing district hospital in PPP mode.
States that fully allow the facilities of the hospital to the medical college and wish to
provide land at a concession, will receive Viability Gap Funding.
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(b) The Government will, encourage large hospitals with sufficient capacity to offer
resident doctors Diploma and fellow of National Board (DNB/FNB) courses under the
National Board of Examinations.
Improving the standards of professionals seeking jobs abroad
• There is huge demand for teachers, nurses, para-medical staff and care-givers
abroad.
• However, their skill sets, often do not match the employer’s standards and therefore
need to be improved.
• The Budget propose for special bridge courses be designed by the Ministries of
Health, Skill Development together with professional bodies to bring in equivalence.
• Language requirements of various countries need also to be included.
• All these should be achieved through special training packages.
2. Economic Development
(a) Industry, Commerce and Investment
Promotion of entrepreneurship: Entrepreneurship was a strength of India. The

government recognise the knowledge, skills and risk-taking capabilities of the youth. “He is
no longer the job seeker. He is creator of jobs. Now we wish to create more opportunities
and remove road-blocks from his path.”
Creation of an Investment Clearance Cell: Investment Clearance Cell that will provide “end
to end” facilitation and support, including pre-investment advisory, information related to
land banks and facilitate clearances at Centre and State level. It will work through a portal.
Creation of five smart cities: the budget proposes to create five new smart cities in
collaboration with States in PPP mode. Sites will be selected on the basis of principles.
Networked products
Specialisation in the production of networked products will make it a part of global value
chains. Similarly, more investment and employment for the youth will also come.
Scheme for Electronics manufacturing industry:
• The industry is very competitive, and India has its cost advantages.
• The potential of this industry in job creation is immense.
• India needs to boost domestic manufacturing and attract large investments in the
electronics value chain.
• The budget proposes a scheme focussed on encouraging manufacture of mobile

phones, electronic equipment and semi-conductor packaging.
Scheme for the manufacture of medical devices: A scheme for the promotion of medical
devices will be made akin to the electronic manufacturing support measures.
National Technical Textiles Mission:
• India imports significant quantity of technical textiles worth US$ 16 billion every
year.
• To reverse this trend and to position India as a global leader in Technical Textiles, a
National Technical Textiles Mission is proposed with a four-year implementation
period from 2020-21 to 2023-24 at an estimated outlay of Rs 1480 crore.
Enhancing quality in manufacturing - “Zero Defect-Zero Effect” manufacturing

Zero Defect-Zero Effect (ZED)
Prime Minister referred about “Zero Defect-Zero Effect” manufacturing
(Production mechanisms wherein products have no defects. Zero Defect-Zero Effect
manufacturing was first mentioned
Production process which has zero adverse environmental by Prime Minister Narendra Modi in
his 2014 Independence Day speech.
and ecological effects) manufacturing on the quality of
It means zero defect ie, high quality
manufacturing. and zero adverse effect on
environment. Main effort is to raise
Towards these zero defect-zero effect goals, the government quality levels in the unregulated
micro small and medium enterprises
has called for a time-bound adoption by industry of all (MSME) sector.
necessary, mandatory technical standards and their effective enforcement. All Ministries,
during the course of this year, would be issuing quality standard orders.
NIRVIK- for higher export disbursement: To achieve higher export credit disbursement,
a new scheme, NIRVIK is being launched. It facilitates higher insurance coverage, reduction
in premium for small exporters and simplified procedure for claim settlements.
Digital refund to exporters:
• The Scheme for Reversion of duties and taxes on exported products will be launched
this year.
• Under the scheme, duty refunds to exporters - which are not getting exempted or
refunded under any other existing mechanism will be digitally refunded. Here, duties
and taxes levied at the Central, State and local levels, such as electricity duties and
VAT on fuel used for transportation will be refunded.
Each district should be developed as an export hub:
• Vision of the Prime Minister is that each District should develop as an export hub.
• Towards this, efforts of the Centre and State governments are being synergised and
institutional mechanisms are being created.
GeM:
• Government e-Marketplace (GeM) is trying to create a Unified Procurement System

in the country for providing a single platform for procurement of goods, services and
works.
• It offers a great opportunity for Medium, Small and micro Enterprises (MSMEs).
• Nearly 3.24 lakh vendors are already on this platform. Its proposed to take its
turnover to Rs 3lakh crores.
(b) Infrastructure (second component of Economic Development)
National Infrastructure Pipeline
• Prime Minister had highlighted that Rs 100 lakh crore would be invested on
infrastructure over the next 5 years.
• As a follow up the National Infrastructure Pipeline was launched by the Ministry on
31st December 2019 of Rs 103 lakh crore.
• It consists of more than 6500 projects across sectors and are classified as per their
size and stage of development.
• The projects will include housing, safe drinking water, access to clean and affordable
energy, healthcare for all, world-class educational institutes, modern railway
stations, airports, bus terminals, metro and railway transportation, logistics and
warehousing, irrigation projects, etc.
• The National Infrastructure Pipeline aims at improving the ease of living for each
individual citizen in the country.
• It also will bring reforms in development, operation and maintenance of these
infrastructure projects.
National Skill Development Agency will skill youth in infrastructure and related areas.
• National Skill Development Agency will give special thrust to infrastructure-focused

skill development opportunities for the youth.
• This will give opportunities to the youth in construction, operation and maintenance
of infrastructure.
• The government will set up a project preparation facility for infrastructure projects.
This programme would actively involve young engineers, management graduates and
economists from our Universities.
• Government will direct all infrastructure agencies of the government to involve youth-
power in start-ups. They will help in rolling out value added services in quality public
infrastructure for citizens.
National Logistics Policy: A National Logistics Policy will be launched soon.
• It will clarify the roles of the Union Government, State Governments and key
regulators.
• It will create a single window e-logistics market and focus on generation of
employment, skills and making MSMEs competitive.
Highway development: Accelerated development of highways will be undertaken.
• This will include development of 2500 Km access control highways, 9000 Km of

economic corridors, 2000 Km of coastal and land port roads and 2000 Km of strategic
highways.
• Delhi-Mumbai Expressway and two other packages would be completed by 2023.
Chennai-Bengaluru Expressway would also be started.
FASTag mechanism encourages greater commercialisation of our highways so that NHAI

can raise more resources. The budget proposes to monetise at least twelve lots of highway
bundles of over 6000 Km before 2024.
Railways
a) The government has commissioned 550 wi-fi facilities in as many stations.

b) Eliminated unmanned crossings
c) Government also aims to achieve electrification of 27000 Km of tracks.
Five measures to be highlighted on railways:
• Setting up a large solar power capacity alongside the rail tracks, on the land owned
by the railways.
• Four station re-development projects and operation of 150 passenger trains would
be done through PPP mode. The process of inviting private participation is underway.
• More Tejas type trains will connect iconic tourist destinations.
• High speed train between Mumbai to Ahmedabad would be actively pursued.
• 148 km long Bengaluru Suburban transport project at a cost of
Rs 18600 crore, would have fares on metro model. Central Government would
provide 20% of equity and facilitate external assistance up to 60% of the project cost.
Seaports: Corporatizing at least one major port: This government would consider
corporatizing at least one major port and subsequently its listing on the stock exchanges.
Arth Ganga
Technology has to used in ports to improve performance.
'Arth Ganga' has been
A governance framework keeping with global benchmarks conceptualised by Prime Minister
Narendra Modi and it envisages a
needs to be put in place.
sustainable development model
Inland Waterways: received a boost in the last five years with a focus on economic activities
related to Ganga.
• The Jal Vikas Marg on National Waterway-1 will be completed.
• The 890 Km Dhubri-Sadiya connectivity will be done by 2022.
• Developing waterways has its impact on the eco-system on both the banks of the
river. Prime Minister has conceptualised “Arth Ganga”. Plans are afoot to energise
economic activity along riverbanks.
Aviation: One hundred more airports would be developed by 2024 to support Udaan
scheme. It is expected that the air fleet number shall go up from the present 600 to 1200
during this time.
DISCOM Reforms
• Taking electricity to every household has been a major achievement.

• At the same time, the distribution sector, particularly the DISCOMS are under
financial stress.
• The Ministry intends to promote “smart” metering.
• States and Union Territories are urged to replace conventional energy meters by
prepaid smart meters in the next 3 years.
• Also, this would give consumers the freedom to choose the supplier and rate as per
their requirements.
• Further measure to reform DISCOMs would be taken.
Oil and gas
• In the upstream sector of oil and gas, the Open Acreage Licensing Policy (OALP) is a
success having awarded 1,37,000 sq km for exploration to private sector and to the
CPSEs.
• City gas distribution rights are also awarded.
• Government targeted to expand the national gas grid from the present 16200 km
to 27000 km.
• To deepen gas markets in India, further reforms will be undertaken to facilitate
transparent price discovery and ease of transactions.
New Economy: is based on innovations that disrupt established business models.
• Artificial intelligence, Internet-of-Things (IoT), 3D printing, drones, DNA data storage,

quantum computing, etc., are re-writing the world economic order.
• India has already embraced new paradigms such as the sharing economy with
aggregator platforms displacing conventional businesses.
• Government has harnessed new technologies to enable direct benefit transfers and
financial inclusion on a scale never imagined before.
“Data is the new oil now and to utilise Analytics, Fintech and Internet of Things (IOT) are
changing the way we deal with our lives.” To utilise the opportunity following steps will be
taken:
• A policy to enable private sector to build Data Centre parks throughout the country. It
will help our firms to skilfully incorporate data in every step of their value chains.
• Digital connectivity to public institutions – the Bharatnet: All “public institutions” at
Gram Panchayat level such as Anganwadis, health and wellness centres, government
schools, PDS outlets, post offices and police stations will be provided with digital
connectivity. So, Fibre to the Home (FTTH) connections through Bharatnet will link
100,000-gram panchayats this year.
• The budget proposes to provide Rs 6000 crore to Bharatnet programme in 2020-21.
Intellectual Property Rights (IPRs): Protection and promotion
The base of the knowledge-driven enterprises has to be expanded. Intellectual property

creation and protection will play an important role. Several measures are proposed in this
regard, which will benefit the Start-ups.
1) Establishing a platform and a centre for Intellectual Property: A digital platform would
be promoted that would facilitate seamless application and capture of IPRs.
A Centre which would work on the complexity and innovation in the field of
Intellectual Property will be established in an Institute of Excellence.
2) Knowledge Translation Clusters would be set up across different technology sectors
including new and emerging areas.
3) Creation of test beds and small-scale manufacturing facilities: For designing,
fabrication and validation of proof of concept, and further scaling up Technology
Clusters, harbouring such test beds and small-scale manufacturing facilities would
be established.
4) Genetic Mapping: Mapping of India’s genetic landscape is critical for next generation
medicine, agriculture and for bio-diversity management. To support this
development, government will initiate two new national level Science Schemes for the
creation of a comprehensive database.
5) Funding to start-ups: The government proposes to provide early life funding, including
a seed fund to support ideation and development of early stage Start-ups.
Quantum technology: Quantum technology is opening up new frontiers in computing,

communications, cyber security with wide-spread applications. It is expected that lots of
commercial applications would emerge from theoretical constructs which are developing in
this area.
An outlay of Rs 8000 crore over a period five years will be given for the National Mission on
Quantum Technologies and Applications.
3. Caring Society
Success of ‘Beti Bachao Beti Padhao’

Caring society focus on:
Gross enrolment ratio of girls across all
(a) Women &Child, Social Welfare. levels of education is now higher than
boys.
(b) Culture and Tourism Enrolment ratio of girls and boys
(c) Environment and Climate Change. Education Girls % Boys%
level
(a) Women & Child, Social Welfare Elementary 94.32 89.28
level
Secondary 81.32 78
Mother and childcare: Health of mother and child are
level
closely corelated. An allocation of Rs 28,600crore is Higher
secondary 59.70 57.54
provided for programs that are specific to women.
level
(a) POSHAN Abhiyan: To improve the nutritional status of children (0-6 years), adolescent
girls, pregnant women and lactating mothers, POSHAN Abhiyaan
Prime Minister launched a “Poshan Abhiyan” in The Prime Minister’s Overarching Scheme for
Holistic Nutrition or POSHAN Abhiyaan or
2017-18. National Nutrition Mission, is a flagship
programme to improve nutritional outcomes
More than six lakh anganwadi workers are for children, pregnant women and lactating
equipped with smart phones to upload the mothers. Launched by the Prime Minister on
the occasion of the International Women’s
nutritional status of more than 10 crore Day on 8 March 2018 from Jhunjhunu in
households. Rajasthan, the POSHAN Abhiyaan directs the
attention of the country towards the problem
(b) Task force on raising women’s age at marriage: of malnutrition and address it in a mission-
Women’s age of marriage was increased from mode.
fifteen years to eighteen years in 1978, by amending erstwhile Sharda Act of 1929.
Now, there are more opportunities for women to pursue higher education and careers. MMR
is decreasing due to improvement of nutrition levels. Thus, the entire issue about age of a
girl entering motherhood needs to be seen in this light. Hence, a Task force will be appointed
on raising women’s age at marriage that will submit its recommendations in six months.
(c) Allocation to nutrition related programmes: The budget provides Rs 35600 crore for
nutrition-related programmes for the financial year
Budget allocations to various categories
2020-21.
(2020-21)
Adoption of technologies for cleaning sewer systems: Category Rs crores
Women specific 28,600
• Government is determined that there shall be programmes
Nutrition related 35,600
no manual cleaning of sewer systems or programmes
septic tanks. Scheduled Castes and 85,000
Other Backward classes
• Suitable technologies for such tasks have
Scheduled tribes 53,700
been identified by the Ministry of Housing and Senior citizens 9,500
Urban Affairs.
• The Ministry is working with urban local bodies for the adoption of these
technologies.
(b) Culture and Tourism

Creation and re-curation of
(i) Indian Institute of Heritage and Conservation: Museums
• Government proposes to establish an Indian Museum Activity

Institute of Heritage and Conservation under Indian Museum in Re-
Ministry of Culture. Kolkata and 4 more curation
museums.
• The Institute shall have the status of a deemed
Museum on
University to start with. Numismatics and
Creation
• Acquisition of knowledge in disciplines such as Trade: Old Mint
building Kolkata.
museology and archaeology are essential for
Tribal Museum – Creation
collecting and analysing scientific evidence of
Ranchi.
such findings and for dissemination through high
Maritime Museum, Creation
quality museums. Lothal, Ahmedabad.
• Currently lack of trained manpower is a handicap
On-site museums at 4
for both these disciplines. new archaeological
sites: Rakhigarhi,
(ii) Development of new archaeological sites: Five Hastinapur, Creation
Shivsagar, Dholavira,
archaeological sites would be developed as iconic sites Adichanallur.
with on-site Museums. They are:
• Rakhigarhi (Haryana),
• Hastinapur (Uttar Pradesh)
• Shivsagar (Assam),
• Dholavira (Gujarat)
• Adichanallur (Tamil Nadu).
(iii) Re-curation and creation of museums:
• Recreation of the country’s oldest museum

-the Indian Museum in Kolkata.
• Renovation and re-curation: Four more
museums from across the country shall be
taken up for renovation and re-curation so
that a world class experience can be offered
to visitors.
• Museum on Numismatics and Trade: In
the historic Old Mint building Kolkata, a museum on Numismatics and Trade will be
created.
• Tribal Museum: A Tribal Museum will be established in Ranchi (Jharkhand).
• Maritime Museum: A maritime museum would be set up at Lothal- the Harrapan age
maritime site near Ahmedabad, by Ministry of Shipping.
iv) Allocation to culture: Ministry of Culture will be provided Rs 3,150crore for 2020-21.
(v) India’s performance in travel and tourism sector:
• India has moved up from rank 65 in 2014 to 34 in 2019 in the Travel & Tourism
Competitive Index (World Economic Forum).
• Foreign exchange earnings grew 7.4% to Rs 1.88 lakh crores for the period January
to November 2019 from Rs 1.75 lakh crores
(vi) State governments should prepare roadmap: for certain identified destinations and
formulate financial plans during 2021 and specified grants will be provided to them.
(vii) Budget allocates Rs 2500 crores for tourism promotion.
(c) Environment & Climate Change
(i) Coalition for Disaster Resilient Infrastructure (CDRI):
• Coalition for Disaster Resilient Infrastructure (CDRI) was launched by the the Prime
Minister in September 2019, with its Secretariat in Delhi.
• This global partnership is the second such international initiative after the launch of
International Solar Alliance in 2015.
• The CDRI will help in addressing a number of Sustainable Development Goals
(SDGs), as also the aims of Sendai framework.
• It will enhance climate change adaptation with a focus on disaster resilient
infrastructure.
India’s effort for climate protection: Coalition for Disaster Resilient Infrastructure
(CDRI)
• India’s naturally determined climate >The CDRI formed in 2019, is an international
coalition of national governments, UN agencies and
contribution: India submitted its programmes, multilateral development banks,
Nationally Determined Contribution, financing mechanisms, private sector, and
knowledge institutions aimed at promoting disaster-
under the Paris Agreement in 2015
resilient infrastructure.
on a “best effort” basis, keeping in >Its objective is to promote the resilience of new and
existing infrastructure systems to climate and
mind the development imperative of
disaster risks, thereby ensuring sustainable
the country. development.
• Climate action coordinating efforts: Its >CRDI was developed through consultations with
more than 35 countries, and it aims at reduction in
implementation effectively begins on infrastructure losses from disasters, including
1st January 2021. Our commitments extreme climate events.
>The interim secretariat of CDRI is at New Delhi.
as action will be executed in various >CDRI is the second major coalition launched by
sectors by the India outside of the UN; first being the International
Solar Alliance.
Departments/Ministries concerned
Sendai Framework
through the normal budgeting >The Sendai Framework is an international
document, adopted by UN member states during
process.
2015 at the World Conference on Disaster Risk
• Action on high emitting thermal power Reduction, held in Sendai, Japan.
plants: For power plants, that are old >The framework is the first major agreement that
provides Member States with concrete actions to
and with high emission levels, the protect development gains from the risk of disaster.
utilities running them would be >The framework recognises that the State has the
primary role to reduce disaster risk, but that
advised to close them, if their responsibility should be shared with other
emission is above the pre-set norms. stakeholders including local government, the private
sector and other stakeholders.
The land so vacated can be put to
alternative use.
• Climate action for cities with more than 1 mn population: In large cities having
population above one million, clean air is a matter of concern. The government
proposes to encourage States that are formulating and implementing plans for
ensuring cleaner air in cities above one million. Parameters for the incentives would
be notified by the Ministry of Environment, Forests and Climate change. An

allocation of Rs 4400 crore for this purpose will be made for 2020-21.
Governance
The government proposes different schemes and programmes under Aspirational India,
Economic Development and Caring India. They are the flowers in the bouquet. Governance
is the one hand holding this bouquet whereas the financial sector is the other hand.
• But hands are necessary to hold the bouquet. One such hand is Governance – clean,
corruption-free, policy driven and good in intent and most importantly trusting in
faith.
• Trusting every citizen, the aspirational youth, the hard-working women, the risk-
taking entrepreneur, the ever hopeful and untiring farmer or the wise and old senior
citizen. Many among them are taxpayers. Others may not be taxpayers today.
• Prime Minister insisted on Ease of Living as a goal to be achieved on behalf of all
citizens.
• An important aspect of both ease of living and ease of doing business is fairness and
efficiency of tax administration.
• Government wish to enshrine in the statutes a “taxpayer charter” through this
budget.
• “The government would like to reassure taxpayers that we remain committed” to
taking measures so that our citizens are free from harassment of any kind.
(i) Legislations to support governance standards:
• There has been a debate about building into statutes, criminal liability for acts that
are civil in nature.
• For Companies Act, certain amendments are proposed, and they are to be made that
will correct this.
• Similarly, other laws would also be examined, where such provisions exist, and
attempts would be made to correct them.
(ii) National Recruitment Agency for the recruitment of Non-Gazetted posts
• The Government intends to introduce major reforms in recruitment to Non-Gazetted

posts in governments and public sector banks.
• At present, candidates have to appear for multiple examinations conducted by
multiple agencies at different points of time, for similar posts.
• This place enormous burden on time, effort and cost of young people.
• To mitigate their hardship, it is proposed to set up a National Recruitment Agency

(NRA) as an independent, professional, specialist organisation for conduct of a
computer-based online Common Eligibility Test for recruitment to Non-Gazetted posts.
• A test-centre in every district, particularly in the Aspirational Districts would be set
up.
(iii) Direct recruitment to Tribunals and specialised bodies: For speedy disposal of
commercial and other disputes, Government has constituted various Tribunals and
specialised bodies. It is proposed to evolve a robust mechanism for appointment including
direct recruitment to these bodies to attract best talents and professional experts.
(iv) Strengthening the Contract act to ensure stable and predictable business
environment:
• A stable and predictable business environment is a key objective of this government.

• There is also a strong argument for ensuring that contracts are honoured.
• India has a sound framework related to Contracts Act.
• “We shall deliberate upon strengthening it.”
(v) National Policy on Official Statistics
• Indian Statistical system should meet the challenges of real time monitoring of our
increasingly complex economy. Data must have strong credibility.
• The proposed new National Policy on Official Statistics would use latest technology
including AI.
• The Policy would lay down a road-map towards modernised data collection,
integrated information portal and timely dissemination of information.
(vi) G-20 Presidency for India
• India will host G 20 presidency in the year 2022.

• For this historic occasion, a sum of Rs 100 crore is allocated to begin the
preparations.
(vii) Development of North Eastern Region
• Government is ensuring smooth access to financial assistance from multilateral and

bilateral funding agencies to help introduce innovative and global best practices for
the development activities in the North-East.
• Central Government has effectively used an online portal to reduce gestation period
of online.
• This has improved the flow of funds to the northeast region.
Jammu and Kashmir and Ladakh
• The Government is fully committed to supporting the all-round development of the

newly formed Union Territories of J&K and the Union Territory of Ladakh.
• Accordingly, an amount of Rs 30,757 crore has been provided for the Financial Year
2020-21.
• An amount of Rs 5,958 crore has been provided for the Union Territory of Ladakh.
Financial Sector
Financial sector is the second hand that holds the bouquet that contains the three flowers
– Aspirational India, Economic Development and Caring India.
To become a USD 5 trillion economy, the financial architecture should keep evolving and
move from strength to strength.
(i) Public Sector Banks:
• The government had earlier approved consolidation of 10 banks into four.

• In the last few years, Government of India has infused about Rs 3,50,000 crore by
way of capital into Public Sector Banks for regulatory and growth purposes.
• Governance reforms would be carried out in these banks, so that they become more
competitive.
• A few of the PSBs will be encouraged to approach capital market to raise additional
capital.
• A robust mechanism is in place to monitor the health of all Scheduled Commercial
Banks and that depositors’ money is safe.
(ii) Enhancing the Deposit Insurance limit: The Deposit Insurance and Credit Guarantee
Corporation (DICGC) has been permitted to increase Deposit Insurance Coverage for a
depositor, from the current level of Rs one lakh to Rs 5 lakh per depositor.
(iii) Strengthening regulation of the cooperative banks: To strengthen the Cooperative

Banks, amendments to the Banking Regulation Act are proposed for increasing
professionalism, enabling access to capital and improving governance and oversight for
sound banking through the RBI.
(iv) NBFC’s asset recovery criterion under SARFAESI -becomes stricter: The limit for
NBFCs to be eligible for debt recovery under the Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 is proposed to
be reduced
from Rs 500 crore to asset size of Rs

New asset recovery limit norm for the enforcement of
100 crore or loan size from existing Rs SARFAESI in NBFCs
1 crore to Rs 50 lakh. Norm New Earlier
Asset size of the NBFC 100 crores 500 crores
(v) Selling of IDBI shares to private or
Loan size of the asset 50 Lakh 1 crore
sector: Now, there is a need for greater
private capital in banks. Hence, it is proposed to sell the balance holding of Government of
India IDBI Bank to private, retail and institutional investors through the stock exchange.
(vi) Efforts will be made to inject more transparency and professionalism in PSBs.
(vii) To help easy mobility while in jobs, the government wish to infuse into the Universal
Pension coverage with auto enrolment. Similarly, a mechanism that enable inter-operability
and provide safeguards for the accumulated corpus will also be tried. (Pension schemes are
launched by several firms including insurance companies, banks etc. Hence, auto
enrolment and interoperability help the employee to have more flexibility when he is
switching jobs).
(viii) Separation of NPS trust of government employees from PFRDA:
• Regulatory role of PFRDAI should be strengthened.

• NPS trust for government employees will be separated from PFRDA by amending the
PFRDA Act.
• Hence, a Pension Trust for non-government employees will be established.
(ix) MSMEs: MSMEs are vital to keep the wheels of economy moving. They also create job,
innovate and are risk takers. Following are the main initiatives for MSMEs in the budget.
a. Supporting invoice financing through TReDS
The government will make necessary amendments to the Factor Regulation Act 2011.
This will enable NBFCs to extend invoice financing to the MSMEs through TReDS, thereby
enhancing their economic and financial sustainability.
b. Banks will extend subordinate credit to NBFCs. Working capital credit remains a major
issue for the MSMEs.
• It is proposed to introduce a scheme to provide subordinate debt for entrepreneurs

of MSMEs.
• This subordinate debt to be provided by banks What is TReDS?

The Trade Receivable Discounting
would count as quasi-equity and would be fully System (TreDS) is an online bill
discounting platform that helps cash
guaranteed through the Credit Guarantee starved MSMEs to raise funds by selling
Trust for Medium and Small Entrepreneurs their trade receivables to corporates.
Trade receivables are amounts billed
(CGTMSE). by a business to its customers (eg.
MSMEs); when the latter delivers goods or
• The corpus of the CGTMSE would accordingly services to them. Since its active
be augmented by the government. working in 2017, TReDS platform helped
the regular flow of operational funds to
(c) Extension of debt restructuring scheme for MSMEs.
What is Invoice Financing?
MSMEs: More than five lakh MSMEs have benefitted Invoice Financing is a way mobilising
money by a business unit against the
from restructuring of debt permitted by RBI in the last amounts due from customers. For
year. The restructuring window was to end on March example, an MSME may get money
through invoice financing by using the
31, 2020. Government has asked RBI to consider invoice that is due from its customer.
What is Factoring?
extending this window till March 31, 2021. Factoring is a business where an entity
(NBFC – Factor) acquire receivables (bills)
(d) An app-based invoice financing loans product from others (MSMEs) by extending loans
or advances.
will be launched. This will obviate the problem of
What is NBFC factor?
delayed payments and consequential cash flows NBFC- Factor means a non-banking
financial company doing mainly the
mismatches for the MSMEs. business of factoring.
What is subordinate debt?
(d) Technology upgradation and other supports Subordinate debt is unsecured loan or
bond that ranks below other, more
the export activities of MSMEs in pharma, auto credible loans with respect to claims on
components sector etc. assets or earnings. This means that when
the entity goes of liquidation, a less
Many mid-size companies are successful domestically priority will be there for such loans for
reimbursement.
but not in export markets. What is (CGTMSE)?
CGTMSE is a trust created by Ministry of
For selected sectors such as pharmaceuticals, auto MSMEs, GoI and SIDBIT to implement the
Credit Guarantee Fund Scheme for Micro
components and others, the budget propose to extend and Small Enterprises. Benefit of the
scheme is that it guarantees the loans
handholding support – for technology upgradations,
mobilised by MSMEs.
R&D, business strategy etc.
For this, a scheme of Rs1000 crore will be anchored by EXIM Bank together with SIDBI.
Financial Markets
Deepening of the bond market
Bond market expansion is a work in progress. “To achieve faster growth, we would require
flow of capital in our financial system.” A lot of work has been done on this in consultation
with the RBI. Following are the main developments in this area.
(a). Certain specified categories of Government

What is credit default swap (CDS)?
securities would be opened fully for non- A credit default swap (CDS) is a contract that
resident investors, apart from being available to allows an investor to "swap" or offset his or
her credit risk with that of another investor.
domestic investors as well. For example, if a bank is worried that one of his
borrowers is going to default on a loan, it can use
(b) The limit for FPI in corporate bonds, a CDS to offset or swap that risk.
currently at 9% of outstanding stock, will be To swap the credit default, the lender buys a CDS
from another investor who agrees to reimburse
increased to 15% of the outstanding stock of
the lender in the case the borrower defaults.
corporate bonds. CDS runs on the basis of a premium payment to
run the contract, which is like an insurance
(c). To improve investors’ confidence and to policy.
expand the scope of credit default swaps, the What is Exchange Traded Fund (ETF)?
An ETF is a basket of securities that are traded on
budget proposes to formulate a legislation, to a stock exchange. It is traded just like shares in
be placed soon before the House, for laying the stock market. ETFs are listed on a recognized
exchange and their units can be bought and sold
down a mechanism for netting of financial directly on the exchange through a stockbroker
contracts. during the trading hours.
A debt ETF contains bonds issued by a company
The Debt-based Exchange Traded Fund or government. In the case of equity ETF, it
contains only shares.
(ETF) recently floated by the government was a
big success. Government proposes to expand this by floating a new Debt-ETF consisting
primarily of government securities.
In December 2019, the government launched India’s first debt ETF – the Bharat Bond
ETF. Bharat bond ETF is a debt exchange-traded fund (ETF) that will hold bonds issued by
PSEs owned by the Government of India.
(d) Debt based Exchange Traded Funds: The Debt-based Exchange Traded Fund (ETF)
recently floated by the government was a big success. Government proposes to expand this
by floating a new Debt-ETF consisting primarily of government securities.
This will give retail investors access to government securities as much as giving an
attractive investment for pension funds and long-term investors.
(d) Partial Credit Guarantee scheme for NBFCs/HFCs will be continued.
• The scheme was launched Union budget 2019-20.

• To further this support of providing liquidity, a mechanism would be devised.
• Government will offer support by guaranteeing securities so floated.
Infrastructure Financing
(a) National Infrastructure Pipeline
• National Infrastructure Pipeline aims to invest Rs 103 lakh crore in infra projects.
• Of this, Rs 22,000 crore has already been provided, as support to Infrastructure
Pipeline.
• This comes as equity support to Infrastructure Finance Companies such as IIFCL
and a subsidiary of NIIF.
• They would leverage it, as permissible, to create financing pipeline of more than Rs
1,00,000 crore. This would create a major source of long-term debt for infrastructure
projects.
(b) IFSC, GIFT
The GIFT city has the potential to become a centre of international finance as well as a
centre for high end data processing:
• GIFT IFSC has an approved Free Trade Rupee derivatives-the backgrounder

zone for housing vaults. Currency derivatives are exchange-based
futures and options contracts that allow one
• It already has 19 insurance entities, 40 to buy or sell other currencies to hedge
banking entities. against currency movements. In the case of
rupee derivatives, one of the currencies will
• It has also provided for setting up of be rupee and it is traded for future date
precious metals testing laboratories and against another currency.
In recent years, there is high volume of
refining facilities. trade in rupee paired currency trades.
• With the approval of the regulator, GIFT City Volumes are going up in offshore trading
would set up an International Bullion centres like London, Singapore etc. This
exchange(s) in GIFT-IFSC as an additional option means that rupee is increasingly
internationalised. Hence, a committed under
for trade by global market participants.
Smt. Usha Thorat suggested to promote
rupee derivatives in Indian markets. The
Rising rupee trading volume in offshore Committee recommended a host of
financial markets: In recent years there has been measures to curb the rising influence of the
offshore rupee markets. The budget has
a surge in trading volumes of Indian rupee in the made a follow up on that by promoting rupee
offshore financial centres. derivative trading in the GIFT city.
• The Government and RBI has taken various measures to permit Rupee derivatives
to be traded in the International Financial Services Centre at GIFT city, Gujarat.
• This will enable India to enhance its position worldwide, create jobs in India and will
lead to better price discovery of gold.
Disinvestment
• Listing of companies on stock exchanges discipline a company and provides access

to financial markets and unlocks its value.
• It also gives opportunity for retail investors to participate in the wealth so created.
• The government now proposes to sell a part of its holding in LIC by way of Initial
Public Offer (IPO).
Disinvestment targets for 2020-21
Disinvestment nature In Rupees crores
Disinvestment receipts 120000
Disinvestment of Government stake in PSBs and

Financial Institutions (LIC).
90000
Total disinvestment receipts 210000
Disinvestment situation during the last few years (Rs crores):
Year Target Realised
2017-18 100000 100056
2018-19 80000 94726
2019-20 105000 65000
2020-21 210000 ----
Fiscal Management
(a) XV Finance Commission has given its first report for the Financial Year 2020-21.
• In the spirit of co-operative federalism, the government in substantial measure,

accepted the recommendations of the Commission.
• The commission would submit its final report to the President during the latter part
of the year, for five years beginning 2021-22.
(b) GST Compensation to states:
• It is decided to transfer to the GST Compensation Fund balances due out of collection
of the years 2016-17 and 2017-18, in two instalments.
• Hereinafter, transfers to the fund would be limited only to collection by way of GST
compensation cess.
(c) A new approach to modity Centrally Sponsored Schemes and Central Sector
Schemes is necessary, to align them with emerging social and economic needs of tomorrow,
and to ensure that scarce public resources are spent optimally.
(d) Transparency in fiscal figures: Recently there has been a debate over transparency
and credibility of the projected fiscal numbers.
Fiscal deficit figures:
• In the budget, the procedure adopted is
compliant with the FRBM Act.
Year Fiscal deficit
• This is also consistent with the practices
as a % of GDP
hitherto followed.
• However, for greater clarity, this budget 2020-21 (RE) 3.5
enumerated those central Government

2019-20 (BE) 3.8
debts that are not part of market
borrowing and are used to fund the expenditure at the annexes.
• Servicing of interest and repayment of these debts as hitherto, are done out of
Consolidated fund of India.
(e) Total size of the budget: Keeping in mind commitment of the Government towards
various schemes and need for improvement in quality of life, level of expenditure has been
kept at Rs 30.42 lakh crore.
Pat B
Taxation
Direct taxes
(a) Corporate income Tax
• The government with the objective ensuring that India stays globally competitive and
a favoured destination for investment, the corporate tax rate has been reduced for
new companies in the manufacturing and electricity sector to 15%.
• Similarly, for the existing companies, the rate has also been brought down to just
22%.
• As a result, our corporate tax rates are now amongst the lowest in the world.
As part of the last stimulus package, the government had reduced CIT rates substantially.
The budget keeps this rate structure. Minimum Alternative Tax rate also has been reduced
to 15%.
What is tax competition?

Tax Competition is the process by which countries, states or even local administrations use tax cuts, tax
breaks, tax loopholes or tax subsidies to attract investment, hot money and even wealthy individuals.
Cutting personal income tax is also a part of the strategy to promote domestic economic activities like
consumption. Following figure shows declining tax rates across the globe.
Table: Corporate Income Tax rates in major regions

Region Average Rate
Africa 28.45%
Asia 21.32%
Europe 20.27%
North America 25.85%
Oceania 23.75%
South America 27.63%
G7 27.65%
OECD 23.59%
BRICS 27.40%
EU 21.77%
G20 27.11%
India 25.17%
Recent developments – Trumps’ Tax Cut and Jobs Act
Notable tax cuts were made by the Trump administration in corporate and personal income taxes. The
Trump administration introduced the Tax Cut and Jobs Act to promote investment and consumption by
reducing taxes in 2017.
(image courtesy: Tax Foundation)
(b) Personal Income Tax – a simplified tax regime for PIT
To provide significant relief to the individual taxpayers and to simplify the Income-
tax law, the budget propose to bring a new and simplified personal income tax regime
wherein income tax rates will be significantly reduced for the individual taxpayers who forgo
certain deductions and exemptions.
Table: the new PIT structure
Taxable Income New Tax Rates

Slab (Rs)
0-2.5 Lakh Exempt
2.5-5 Lakh 5%
5-7.5 Lakh 10%
7.5-10 Lakh 15%
10-12.5 Lakh 20%
12.5-15 Lakh 25%
Above 15 Lakh 30%
The above new tax regime will be optional for the taxpayers.
• An individual who is currently availing more deductions & exemption under the
Income Tax Act may choose to avail them and continue to pay tax in the old regime.
• The new personal income tax rates will result in a revenue foregone of Rs 40,000
crore per year.
• An individual who opts for the new regime would need no assistance from an expert
to file his return and pay income tax.
The existing PIT structure that is with exemptions and deductions is as following:
Tax Slab Tax Rate
Upto Rs 250000* Nil
Rs 250001 to Rs 5 lakh 5 per cent
Rs 500001 to Rs 10 lakh 20 per cent
Above Rs 10 lakh 30 per cent
*Rebate of Rs 5 lakh is applicable
PIT structure is crowded with exemptions and deductions
The current income tax regime of the country has more than one hundred exemptions and
deductions of different nature are provided in the Income-tax Act. Under the new PIT
regime, around 70 of them were removed. The government will review and rationalise the
remaining exemptions and deductions in the coming years with a view to simplifying the
tax system and lowering the tax rate.
Exemption limit and highest tax slab (Rs Lakh)

12
10
10 10
4
2.5
2.5
2
Exemption limit (Rs Lakh Highest slab (Rs lakh)
(c) Dividend Distribution Tax
• At present, companies have to pay Dividend Distribution Tax (DDT) on the dividend
paid to its shareholders at 15% plus surcharges and cess.
What is Dividend Distribution Tax?
Dividend Distribution Tax is a tax imposed on dividend distributed by companies to their

investors. DDT is 15 % on the amount of dividend and including surcharge and cess it
comes to 20.56%. Dividend Distribution Tax was introduced in 1997.
Dividend distribution tax is given by the corporate when they are distributing dividend
income to investors. At the same time, individuals have to pay a tax of 10% on dividend
over Rs 10 lakh they received. The task force on Direct Tax Code recommended the abolition
of DDT.
• There is a criticism that DDT results in increase in tax burden for as the dividend
income is often included in their income.
• Further, non-availability of credit of DDT to most of the foreign investors in their

home country makes their investment in India less attractive. In order to increase
the attractiveness of the Indian Equity Market and to provide relief to a large class of
investors, the budget propose to remove the DDT. The dividend shall be taxed only
in the hands of the recipients at their applicable rate.
• Similarly, in the case of holding company, the budget proposes to allow deduction
for the dividend received from its subsidiary. The removal of DDT will lead to
estimated annual revenue forgone of Rs 25,000 crore.
(d) Concessional tax rate for Electricity generation companies
• To give boost to the manufacturing sector, earlier, a concessional corporate tax rate
of 15% to the newly incorporated domestic companies in the manufacturing sector
which start manufacturing by 31 st March 2023.
• In order to attract investment in power sector, the budget proposes to extend the
concessional corporate tax rate of 15% to new domestic companies engaged in the
generation of electricity.
(e) Tax concession for foreign investments
• Incentivisation to Sovereign Wealth Funds (SWFs): To incentivise the investment

by the Sovereign Wealth Fund of foreign governments in the priority sectors
including infrastructure, the budget proposes to grant 100% tax exemption to their
interest, dividend and capital gains income in respect of investment made in
infrastructure and other notified sectors before 31 st March, 2024 and with a
minimum lock-in period of 3 years.
• Extension of the existing concessional tax on various types of foreign

investment (see below table).
Sl Concession and the foreign Type of investment and time

No investment category period
1. Concessional 5% withholding tax rate Money borrowed and bonds

on interest payment to Non-residents issued upto 30TH June 2023
2. Concessional 5% tax on interest Bonds of government and

payments to FPIs and QFIs. corporate up to 30th June
2023.
3. Concessional withholding rate of 5% Made on the Municipal Bonds.

on interest payment by foreign
investors
Concession for bond listing in IFSC: To incentivise listing of bonds at IFSC exchange, the
budget proposes to further reduce the withholding rate from 5% to 4% on interest payment
on the bonds listed on its exchange.
Start-ups
(a) ESOP tax concession:
• Start-ups generally use Employee Stock Option Plan (ESOP) to attract and retain
highly talented employees during the initial years.
• ESOP is a significant component of compensation for these employees.
• Currently, ESOPs are taxable as perquisites at the time of exercise.
• This leads to cash-flow problem for the employees who do not sell the shares
immediately and continue to hold the same for the long-term.
• In order to give a boost to the start-up ecosystem, the budget proposes to ease the
burden of taxation on the employees by deferring the tax payment by five years
or till they leave the company or when they sell their shares, whichever is earliest.
(b) Higher turnover limit to be eligible for tax concession
• Further, an eligible Start-up having turnover up to 25 crores is allowed deduction of

100% of its the profits for three consecutive assessment years out of seven years if
the total turnover does not exceed 25 crore rupees.
• In order to extend this benefit to larger start-ups, the budget proposes to increase
the turnover limit from existing Rs 25 crore to Rs 100 crores.
• Moreover, considering the fact that in the initial years, a start-up may not have
adequate profit to avail this deduction, budget extends the period of eligibility for
claim of deduction from the existing 7 years to 10 years.
Cooperatives: Concessional tax rate to bring parity with corporates:
• Co-operative are currently taxed at a rate of 30% with surcharge and cess. To bring
parity between the co-operative societies and corporates, budget provide an option
to cooperative societies to be taxed at 22% plus 10% surcharge and 4% cess with no
exemption/deductions.
• Further, the budget proposes to exempt these co-operative societies from Alternative
Minimum Tax (AMT).
Medium, Small and Micro Enterprises (MSME): enhancing the turnover limit for audit
five times
• Currently, businesses having turnover of more than Rs 1 crore rupees are required
to get their books of accounts audited by an accountant.
• To reduce the compliance burden on the MSME sector, the budget proposes to raise
this limit for audit from the existing turnover size of Rs1 crore to Rs 5 crore.
• Further, in order to boost less cash economy, the increased limit shall apply only to
those businesses which carry out less than 5% of their business transactions in
cash.
Affordable housing
• In the last budget, a deduction of up to one lakh fifty thousand rupees for interest
paid on loans taken for purchase of an affordable house was allowed for the period
up to March 31st, 2020. This is now extended to one more year.
• A tax holiday on the profits earned by developers of affordable housing project was
given upto 31st March 2020. This tax holiday will be extended by one more year.
Charity institutions
• The income of charitable institutions is fully exempt from taxation. Further, donation
made to these institutions is also allowed as deduction in computing the taxable
income of the donor.
• In order to ease the process of claiming deduction for donation, it is proposed to pre-
fill the donee’s information in taxpayer’s return. This would result in hassle-free
claim of deduction for the donation made by the taxpayer.
• The budget proposes to make the process of registration of all new and existing
charity institutions completely electronic and a unique registration number (URN)
shall be issued.
• Further, to facilitate the registration of the new charity institution, which is yet to
start their charitable activities, the budget proposes to allow them provisional
registration for three years.
Faceless appeals
• To provide greater efficiency, transparency and accountability to the assessment

process, a new faceless assessment scheme has been introduced.
• In order to eliminate human interface, the budget proposes to amend the Income Tax
Act so as to enable Faceless appeal on the lines of Faceless assessment.
No Dispute but Trust Scheme – ‘Vivad Se Vishwas’Scheme
The ‘SabkaVishwas' Scheme
• The scheme brought in the last budget to reduce litigation in indirect taxes settled
over 1,89,000 cases.
• Currently, there are 4,83,000 direct tax cases pending in various appellate forums
i.e. Commissioner (Appeals), ITAT, High Court and Supreme Court.
• This year, the government proposes to bring a scheme similar to the indirect tax
Sabka Vishwas for reducing litigations even in the direct taxes.
‘Vivad Se Vishwas’ scheme
• Under the newly proposed ‘Vivad Se Vishwas’ scheme, a taxpayer would be required
to pay only the amount of the disputed taxes and will get complete waiver of interest
and penalty provided he pays by 31 st March, 2020.
• Those who avail this scheme after 31 st March, 2020 will have to pay some additional
amount.
• The scheme will remain open till 30 thJune, 2020.
• Taxpayers in whose cases appeals are pending at any level can benefit from this
scheme.
Losses of merged banks
• To ensure that the amalgamated PSBs are able to take the benefit of unabsorbed
losses and depreciation of the amalgamating entities, the budget proposes to make
necessary amendments to the provisions of the Income-tax Act.
Taxpayer’s Charter
CBDT to adopt a taxpayer’s charter: To ensure the tax payers right and to build trust
between tax payers and the tax administration, and for enhancing the efficiency of the
delivery system of the Income Tax Department, the budget proposes the Central Board of
Direct Taxes (CBDT) to adopt a Taxpayers’ Charter.
Instant PAN through Aadhaar
• In the last Budget, interchangeability of PAN and Aadhaar was introduced.
• In order to further ease the process, PAN shall be instantly allotted online on the
basis of Aadhaar without any requirement for filling up of detailed application form.
Indirect Tax
(a) GST: In the case of GST, a simplified return shall be implemented from the 1 st April,
2020. It will make return filing simple with features like SMS based filing for nil return,
return pre-filling, improved input tax credit flow and overall simplification.
Refund process has been simplified and has been made fully automated with no human
interface.
Electronic invoice is another innovation wherein critical information shall be captured

electronically in a centralized system. It will be implemented in a phased manner starting
from this month itself on optional basis. It will facilitate compliance and return filing.
Improving compliance: Several measures have been taken for improving compliance.
Aadhaar based verification of taxpayers is being introduced. This will help in weeding out
dummy or non-existent units. Dynamic QR-code is proposed for consumer invoices. GST
parameters will be captured when payment for purchases is made through the QR-code. A
system of cash reward is envisaged to incentivise customers to seek invoice. Deep data
analytics and AI tools are being used for crackdown on GST input tax credit, refund, and
other frauds and to identify all those who are trying to game the system. Invoice and input
tax credit matching is being done wherein returns having mismatch more than 10 percent
or above a threshold are identified and pursued. Significant policy level changes have also
been made. GST rate structure is also being deliberated so as to address issues like inverted
duty structure.
(b) Customs duty On Customs side, a number of measures have been taken for ease of
doing business. Measures have also been taken for providing a level playing field to our
domestic manufacturers, particularly the MSME sector and for securing borders.
It has been observed that imports under Free Trade Agreements (FTAs) are on the rise.
Undue claims of FTA benefits have posed threat to domestic industry. Such imports require
stringent checks. In this context, suitable provisions are being incorporated in the Customs
Act. In the coming months government shall review Rules of Origin requirements,
particularly for certain sensitive items, so as ensure that FTAs are aligned to the conscious
direction of our policy.
Government is also strengthening provisions relating to safeguard duties which are

applied when surge in imports causes serious injury to domestic industry. Amended
provisions shall enable regulating such surge in imports in a systematic way. The
provisions for checking dumping of goods and imports of subsidized goods are also being
strengthened for ensuring a level playing field for domestic industry. These changes are in
line with the international best practices.
Customs duty exemptions: Exemptions from customs duty have been given in public
interest from time to time. However, a number of these have outlived their utility or have
become outdated. On review, certain such exemptions are being withdrawn. Remaining
custom duty exemptions shall be comprehensively reviewed by September 2020.
Raising import duties in footwear and furniture to support MSMEs: Labour intensive MSME
are facing threat from cheap and low-quality imports. Hence, customs duty is being raised
on items like footwear and furniture that are the favourite products of the MSME sector.
Customs duty on the import of medical equipments: Make in India succeeded in

manufacturing medical equipment as well as exporting them in large quantities. To achieve
the twin objectives of giving impetus to the domestic industry and also to generate resource
for health services, the budget proposes to impose a nominal health cess, by way of a duty
of customs, on the imports of medical equipment keeping in view that these goods are now
being made significantly in India. The proceed from this cess shall be used for creating
infrastructure for health services in the aspirational districts.
Customs duty to support Make in India: Under Make in India initiative, well laid out
customs duty rates were already laid for items like mobile phones, electric vehicles and
their components. This has ensured gradual increase in domestic value addition capacity
in India. Customs duty rates are being revised on electric vehicles, and parts of mobiles as
part of such carefully conceived Phased Manufacturing Plans.
In other changes, customs duty is being reduced on certain inputs and raw materials while
it is being revised upward on certain goods which are being made domestically.
To reduce the burden on print media, the budget proposes to reduce basic customs duty
on imports of newsprint and light-weight coated paper from 10% to 5%.
To help the textile sector, anti-dumping duty on PTA is being abolished.
As a revenue measure, the budget raises excise duty, by way of National Calamity
Contingent Duty on Cigarettes and other tobacco products. But no change is being made
in the duty rates of bidis.
Modification of residency provisions
Existing provision of the income tax act gives the following criteria to be a resident of India.
A taxpayer will qualify as a resident of India if he satisfies one of the following 2

conditions:
1. Stay in India for a year is 182 days or more or
2. Stay in India for the immediately 4 preceding years is 365 days or more and 60 days or
more in the relevant financial year
In the event an individual leaves India for employment during an FY, he will qualify
as a resident of India only if he stays in India for 182 days or more. This otherwise means,
condition (b) above of 60 days would not apply to him
Here comes an option for the citizen to stay here upto 182 days and to remain as
non-resident and thus not to pay any taxes for his global income.
This provision provides relaxation to an Indian citizen or a person of Indian origin

allowing them to visit India for a longer duration without becoming resident of India.
Misuse of the residency provision
The issue of tax misuse of the residency provisions by some individuals. There are
instances that notice where period of 182 days is being misused.
Here, individuals, who are actually carrying out substantial economic activities in
India, manage their period of stay in India as there is a substantial period of 182 days to
stay here by not paying taxes. The individual spends sizable period in India, engage in some
economic activities, gets income and retains non-resident in perpetuity and not be required
to declare their global income in India.
As per statutes, only residents have to pay the tax on their global income. Individuals
manage their stay such that they are not paying tax in any countries. The issue of stateless
persons has been bothering the tax world for quite some time. “It is entirely possible for an
individual to arrange his affairs in such a fashion that he is not liable to tax in any country
or jurisdiction during a year.”
The High Net Worth Individuals (HNWI) typically employ residence practices to avoid
paying taxes to any country/ jurisdiction on income they earn.
Changes proposed in the budget
In the light of above, it is proposed that-
(i) The limit for persons to visit India decreased to 120 days from existing 182 days
for non-resident Indians.
(ii) An individual or an HUF shall be said to be “not ordinarily resident” in India in a

previous year, if the individual or the manager of the HUF has been a non-resident
in India in seven out of ten previous years preceding that year.
(iii) an Indian citizen who is not liable to tax in any other country or territory shall
be deemed to be resident in India.
This amendment will take effect from 1st April 2021 and will, accordingly, apply in
relation to the assessment year 2021-22 and subsequent assessment years.
Table: Budget 2020-21: Major Revenue Expenditure items of the government
Revenue Expenditure items Rs crores As a % of total expenditure

Interest Payments 708203 27%
Defence 323053 12%
Subsidies 262108 10%
Pension 210682 8%
Total Revenue Expenditure 2630145 86%
Table: Major Subsidies: Budget 2020-21
Subsidy Scheme Name

2020-21 (BE)
1. Food 115569.68
2. Fertiliser 71309
a. Urea Subsidy 47805
b. Nutrient Based Subsidy 23504
3. Petroleum 40915.21
a. LPG Subsidy 37256.21
b. Kerosene Subsidy 3659
4. Interest Subsidies 28178.86
Grand Total 262108.76
Table: Budget 2020-21- Rupee comes from (Sources of Receipts):
Budget 2020-21: Rupee comes from

Item Percentage
Borrowing & other liabilities 20
CIT 18
GST 18
Non-tax revenue 10
Union Excise Duties 7
Customs 4
Income tax 17
Non-Debt Capital Receipts 6
Figure: Rupee Comes from (Sources of Receipts)
Table: Budget 2020-21 Rupee Goes to (Expenditure)
Budget 2020-21: Rupee Goes to

Item %
Centrally Sponsored Schemes 9
Central Sector Schemes 13
Other Expenditure 10
Pension 6
State share of taxes and duties 20
Interest payments 18
Defence 8
Subsidies 6
Finance Commission & other transfers 10
Figure Budget 2020-21- Rupee Goes to:
Budget at a Glance: 2020-21
2018-2019 2019-2020 2019-2020 2020-2021

Actuals Budget Revised Budget
Estimates Estimates Estimates
1. Revenue Receipts 1729682 1962761 1850101 2020926

2. Tax Revenue (Net to Centre) 1484406 1649582 1504587 1635909
3. Non -Tax Revenue 245276 313179 345514 385017
4. Capital Receipts 727553 823588 848451 1021304
5. Recovery of Loans 13155 14828 16605 14967
6. Other Receipts 80000 105000 65000 210000
7. Borrowings and Other 634398 703760 766846

796337
Liabilities
8. Total Receipts (1+4) 2457235 2786349 2698552 3042230
9. Total Expenditure (10+13) 2457235 2786349 2698552 3042230
10. On Revenue Account 2140612 2447780 2349645 2630145
of which
11. Interest Payments 587570 660471 625105 708203
12. Grants in Aid for creation 200300 207333 191737 206500
of capital assets
13. On Capital Account 316623 338569 348907 412085
14. Revenue Deficit (10-1) 410930 485019 499544 609219

(2.2) (2.3) (2.4) (2.7)
15. Effective Revenue Deficit 210630 277686 307807 402719

(1.1) (1.3) (1.5)
(14-12) (1.8)
16. Fiscal Deficit 634398 703760 766846 796337

[9-(1+5+6)] (3.4) (3.3) (3.8) (3.5)
17. Primary Deficit (16-11) 46828 43289 141741 88134

(0.2) (0.2) (0.7) (0.4)
Figures are in Rs crores and figures in bracket are as a percent of GDP
Table: Sources of financing the fiscal deficit
Table: Debt receipts or financing of the fiscal deficit (2020-21)

Debt receipts In Rs crores
Market borrowings 535870
Securities against small savings 240000
State PF 18000
Other Receipts 50848
External Debt 4622
Drawn down of cash balance (-) 53003
Grand total 796337
Table: Deficit Indicators Budget 2020-21
2018-2019 2019-2020 2019-2020 2020-21
Fiscal Indicator Actuals (BE) (RE) (BE)
649418 703760 766846 796337
1. Fiscal Deficit -3.4 -3.3 -3.8 -3.5
2. Revenue Deficit 454483 485019 499544 609219
-2.4 -2.3 -2.4 -2.7
262702 277686 307807 402719

3. Effective
Revenue Deficit -1.4 -1.3 -1.5 -1.8
66770 43289 141741 88134
4. Primary Deficit -0.4 -0.2 -0.7 -0.4
Table: Capital Receipts Budget 2020-21
Capital receipt item Rs crores
1. Recovery of Loans 14967
2. Other Receipts
210000
(Disinvestment)
3. Borrowings and
796337
Other Liabilities
Total Capital Receipts 1021304

Source: Budget 2020-21
Table: Non- tax revenues –Budget 2020-21

Sl No. Non-tax revenue item (Rs crores)
1 Interest Dividends and Profits 166437.51

2 Fiscal Services 750.8
3 General Services 21620.82
4 Social and Community services 4268.59
5 Economic Services 188825.02
6 Grants in aid and contribution 812
7 Non-tax revenue from UTs 2302.56
Total 385017.3
Table: Major taxes of the central government and their % share -2020-21
Amount (Rs
Tax crores) Percentage share in total tax revenue
GST 690500 28.5%
Corporate Income Tax 681000 28.1%
Personal Income Tax 638000 26.3%
Union Excise Duties 267000 11.0%
Customs Duties 138000 5.7%
Gross Tax revenue of the centre* 2423020 100.0%
*Before giving state’s share

Figure: Major tax revenues of the centre (%share)
Tojo Jose
www. Indianeconomy.net

Budget-2020-Brief-Note For IAS

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Indianeconomy.

net Budget 2020

During 2014-19, there is a paradigm shift in governance featured by twin focus:

1. Fundamental structural reform and Economic Fundamentals

Challenges of GST in its transition

SabkaSaath, SabkaVikas, SabkaVishwas

• welfare schemes are connected with Direct Benefit Transfer (DBT).

A combination that makes

• To improve physical quality of life through National Infrastructure Pipeline

• Risk mitigation through Disaster Resilience

Budget’s three Prominent Themes

• Development for all, as envisaged under “SabkaSaath, SabkaVikas, SabkaVishwas”.

Government is committed to the goal of doubling farmers’ incomes by 2022. Following

• Energy sovereignty through KUSUM

• Liberalization of farm markets

• Higher investment to purchase farm produce, expansion of logistics and provision

• Adoption of sustainable cropping patterns and

(c)Model Agricultural Produce and Livestock Contract Farming and Services

• 20 lakh farmers for setting up stand-alone solar pumps.

5. Agricultural Warehousing: India has an estimated capacity of 162 million MT of agri-

• NABARD will map and geo-tag

6. Village Storage Scheme by SHGs

7. Kisan Rail – national cold supply chain by Indian Railways:

This will be done on PPP mode.

9. Horticulture: One product one district scheme

• Horticulture sector with an output of 311million MT exceeds production of food

10. Integrating farming system

• Integrated farming systems in rainfed areas shall be expanded.

11. e-NWR will be integrated with e-NAM

• Financing on Negotiable Warehousing Receipts (e-NWR) has crossed Rs 6000 crore.

12. Agricultural credit

• NBFCs and cooperatives are active in the agriculture credit space.

13. Animal Husbandry

14. Blue Economy: Marine Fisheries

• Fish production will be to 200 lakh tonnes by 2022-23,

• Youth will be encouraged to participate in fishery extension through 3477

16. Deen Dayal Antyodaya Yojana

(2) Wellness, Water and Sanitation (second element of Aspirational India)

The Government has a holistic vision of Three Elements of Aspirational India

• Mission Indradhanush has been expanded to cover 12 such diseases, including

Hospitals through PPP with viability gap funding

Use of AI and Machine learning in Ayushman Bharat

TB Harega Desh Jeetega campaign: Commitment to end Tuberculosis by 2025 will be

• Government is committed to ODF Plus to sustain ODF behaviour.

Jal Jeevan Mission

• The scheme aims to provide piped water supply to all households

3. Education and Skills (Third element of Aspirational India)

FDI and ECBs will be utilised in the education sector

Apprenticeship to be embedded with degree and diploma courses of 150 educational

• Employability of general stream students (vis-à-vis services or technology stream)

Internship for fresh engineers

Online education programme for degree level students

• This initiative is to make India as a preferred destination for higher education.

National Police University and National Forensic

• A National Police University and a National Education Rs 99,300 crore

There is shortage of qualified medical doctors and to solve this:

Improving the standards of professionals seeking jobs abroad

(a) Industry, Commerce and Investment

Promotion of entrepreneurship: Entrepreneurship was a strength of India. The

Scheme for Electronics manufacturing industry:

• The budget proposes a scheme focussed on encouraging manufacture of mobile

National Technical Textiles Mission:

Enhancing quality in manufacturing - “Zero Defect-Zero Effect” manufacturing