The Union Budget 2019-20 carries forward the 10-point vision for the decade, articulated in the interim budget, and the goal of becoming a $5 trillion economy over the next five years. The economic strategy involves a three-pronged thrust to infrastructure, digital economy and micro, small and medium enterprises (MSMEs). Initiatives proposed are intended to kick-start the virtuous cycle of investments.

Among the trinity, infrastructure sector related to connectivity has received a very detailed attention. The cost of logistics and transport can be reduced by at least 2%, along with use of inter-operable transport card for payment of user cost. Importantly, the focus on railways continues. Public-private-partnership has been proposed for development and completion of tracks, rolling stock manufacturing and delivery of passenger freight services.

In line with the Make in India goals, the thrust to aviation sector is praise-worthy. The proposed policy interventions for the development of maintenance, repair and overhaul, to achieve self-reliance in aviation segment is a welcome measure. Furthermore, a regulatory roadmap for making India a hub for aircraft financing and leasing activities will be positive.

Other infrastructure initiatives such as One Nation, One Grid for power sector, gas grids, water grids are ambitious, and well thought out. Innovative methods such as setting up of Credit Guarantee Enhancement Corp. is welcome. Deepening the market for long-term bonds with focus on infrastructure, transfer/sale of investments by foreign portfolio investors (FPI) /foreign institutional investors (FII) and an annual global investors’ meet at the national level will ensure sufficient funds to execute critical public projects.

The budget has tried to sort out issues related to MSMEs and startups. The issue of angel tax has been addressed. The 350 crore allocation for 2% interest subvention (on fresh or incremental loans) to all GST-registered MSMEs and rationalization of labour laws will accelerate the formalization of the economy.

The budget has also put lot of emphasis on financial stability, financial governance and market deepening. Accordingly, 70,000 crore has been provided to PSBs to boost credit. The regulatory authority of National Housing Bank (NHB) over housing finance companies (HFCs) has now been entrusted to RBI for better coordination and monitoring.

Furthermore, doing away with the requirement of creating a debenture redemption reserve for NBFCs to raise funds in public issues and allowing NBFCs to directly participate on the TReDS platform will go a long way in addressing balance sheet problems of NBFCs.

The Centre proposes to provide one-time six months’ partial credit guarantee to PSBs to boost the confidence for pool purchase.

In the insurance and pension sector, it has permitted on-shoring of international insurance transactions and, accordingly, net owned fund requirement has been reduced from 5,000 crore to 1,000 crore. 100% FDI is now allowed in insurance intermediaries, which is certain to boost insurance products.

Keeping in view the wider interest of the subscribers, the budget also proposes to separate the National Pension System (NPS) Trust from Pension Fund Regulatory and Development Authority (PFRDA) with appropriate organizational structure. Since bank employees are also a part of NPS, this is a good measure to boost confidence in the scheme.

The idea of retail participation in financial markets has received considerable attention. To this end, the Centre will work with regulators to enable stock exchanges to allow AA-rated bonds as collaterals. In the G-Sec markets, it will supplement efforts by RBI to get retail investors to invest in government treasury bills and securities. Sebi will consider raising the threshold for minimum public shareholding in listed companies from 25% to 35%, which will increase the market float for listed companies.

The innovative proposal of creation of an exchange under Sebi for listing social enterprises and voluntary organizations may turn out to be a state-promoted equity-cum-reward crowd funding mechanism. Besides, it seeks to develop altogether a new segment called rental housing.

Overall, the budget has tried to achieve a rapid economic growth with a human face. The measures to address development of human resource through the new national education policy and national research foundation are efforts in this direction. The budget is a great start to arrive at a $5-trillion economy.

Rajnish Kumar is chairman of State Bank of India.

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