B R Maheswari & Co, the BOKS International member for New Delhi, India, has produced a number of resources following the recent budget announcement from the Indian government.

Their Budget Highlights and Sectoral Summary are both available to download, and a digest is available below.

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1. Economic Performance in perspective

  • India continues to remain the fastest growing major economy in the World in 2018-19, despite a slight moderation in its GDP growth from 7.2% in 2017-18 to 6.8% in 2018-19. India maintained its macro-economic stability by containing inflation within 4% and maintaining a manageable Current Account Deficit (CAD) to GDP ratio
  • Direct taxes have grown by 13.4% due to improved performance of corporate tax. However indirect tax revenue was lower by 16%, mainly due to shortfall in GST collection
  • Quality improvement in overall government expenditure – marking a shift from revenue expenditure to capital expenditure
  • India maintained its journey of continuously declining its debt to GDP ratio during the year

2. Key Policies and Announcements

  • The Budget presented is envisaged as a step towards realising the vision of a $ 5 Trillion economy by FY 2024
  • The Budget envisages enhancing ease of direct and indirect taxation
  • Reiteration of a focus on transforming rural lives. A new Jal Shakti Mantralaya to ensure the vision of Har Ghar Jal
  • Support for NBFCs to tide over the issues facing the sector currently
  • Recapitalisation of Public Sector Banks by Rs. 700 Billion ($ 10 Billion)
  • Focus on strengthening connectivity Infrastructure and harnessing India’s soft power and space skills

3. Highlights – Direct & Indirect Taxes

  • In line with the aforesaid policy directions, the Budget has proposed reduction in the corporate tax rate to 25% for Companies with revenues upto Rs 4 Billion
  • Effective tax rate for individuals having taxable income above ₹20 Million has been increased
  • Tax support for affordable housing
  • There are a slew of measures proposed to convert the cash economy to digital payments
  • A new Sabka Vishwas Legacy Dispute Resolution Scheme proposed to expedite closure of service tax and excise related litigations

Sectoral Impact Analysis

Major sectors which are impacted by Current Year’s Budget are Banking, Financial Services & Insurance (BFSI), Small & Medium Enterprises (SME), Start-Ups and Infrastructure. To boost the growth in Non Banking Financial Corporations (NBFC) and Start Up industry, this year’s budget has put more focus on structural changes and easing the doing business. Some of the key policy announcements in these sectors are highlighted below:

1. Financial Sector

  • Proposed Recapitalization of PSBs by infusing Rs.700 Billion ($ 10 Billion)
  • Easing the fund raising norms for financially sound NBFCs by providing one time partial credit guarantee upto 10% to PSBs taking high rated pooled assets of NBFCs
  • Doing Away with the requirement of maintaining Debenture Redemption Reserves by NBFCs in case of Public Issue as well
  • 100% FDI in Insurance Intermediaries segment
  • RBI to have regulatory powers over NHB

2. Start Ups

  • Relaxation in Angel Tax norms with certain conditions
  • Easing the E-Verification process
  • Time limit to invest capital gain from sale of residential property, in eligible start ups has been extended
  • Loss carry forward provisions have been relaxed. Specially for the resolution of stressed assets under IBC as approved by NCLT, proposals provide for carry forward and set off of losses even if there is a change in the ownership.
  • Exclusive TV channel is proposed to be launched for Start Ups

3. Infrastructure

  • Plans to invest $1.5 Trillion in next five years
  • Special focus on MRO segment within Aviation
  • PPP model for the delivery of passenger freight services under consideration
  • Proposed upgradation of ~ 125 K KM road network
  • Exemption from Basic Custom Duty on certain components and capital goods in Mobile phone industry