Governance reforms to be done to bring in transparency in PSBs

Reported by: |Updated: February 1, 2020

Finance minister Nirmala Sitharaman presented the Union Budget for 2020 in Parliament today, focusing on 3 aspects – aspirational India to boost the standard of living; economic development for all and building a humane and compassionate society

Some of the key highlights in the budget are:

Banking & Finance

Deposit Insurance and Credit Guarantee Corporation (DICGC) permitted to increase deposit insurance coverage to Rs 5 lakh from Rs 1 lakh per depositor. The finance minister says a robust mechanism is in place to monitor and ensure health of all scheduled commercial banks and depositors’ money is absolutely safe.

Cooperative Banks to be strengthened by amending the Banking Regulation Act for increasing professionalism, enabling access to capital, improving governance and oversight for sound banking through the RBI.

The government is proposing to sell part of its holding in Life Insurance Corporation by way of an IPO. Certain specified categories of government securities will be open fully for NRIs, apart from being open to domestic investors. Exchange Traded Fund will be expanded by floating a debt ETF, consisting primarily of government securities. GIFT City will have an International Bullion Exchange, enabling better price discovery of gold. Amendments will be made to enable NBFCs to extend invoice financing to MSMEs. App-based invoice financing loans product will be launched to obviate problem of delayed payments and cash flow mismatches for MSMEs.

India will host G20 Presidency in 2022, Rs100 crore to be allocated for making preparations for this historic occasion, where India will drive global economic agenda.

Tax on cooperative societies will be reduced to 22% plus surcharge and cess, as against 30% at present.

Governance reforms will be carried out to bring in transparency and greater professionalism in PSBs.

Few PSBs will be encouraged to approach the capital market to raise additional capital.

NBFCs eligibility limit for debt recovery is reduced from Rs500 crore to Rs100 crore asset size and Rs 1 crore to Rs 50 lakh loan size.

The government will sell its balance holding in IDBI Bank to private, retail and institutional investors through the stock exchange.

Pension Fund Regulatory Development Authority of India Act will be amended to strengthen regulating role of PFRDAI, facilitate separation of NPS trust for government employees from PFRDAI, enable establishment of a Pension Trust by the employees other than government. Auto-enrolment in universal pension coverage and inter-operability mechanism will be set up to safeguard the accumulated corpus.

Factor Regulation Act 2011 will be amended to enable NBFCs to extend invoice financing to the MSMEs through TReDS. New scheme will provide subordinate debt for entrepreneurs of MSMEs by the banks and will be counted as quasi-equity, it would be fully guaranteed through the Credit Guarantee Trust for Medium and Small Entrepreneurs (CGTMSE). The corpus of the CGTMSE would accordingly be augmented by the government.

The window for MSME’s debt restructuring by RBI will be extended by one year till 31 March  2021.

An app-based invoice financing loans product for MSMEs will be launched to prevent the problem of delayed payments and consequential cash flows mismatches.

Export promotion of MSMEs will be done for selected sectors such as pharmaceuticals, auto components and others. A Rs 1000 crore scheme anchored by EXIM Bank together with SIDBI. hand holding will be launched to support technology upgradations, R&D, business strategy etc.

A digital platform will be promoted to facilitate seamless application and capture of IPRs. Knowledge translation clusters will be set up across different technology sectors including new and emerging areas. For designing, fabrication and validation of proof of concept, and further scaling up technology clusters, harboring test beds and small scale manufacturing facilities will be established. For mapping of India’s genetic landscape, 2 new national level science schemes will be initiated to create a comprehensive database. Early life funding is proposed, including a seed fund to support ideation and development of early stage startups.

Nominal GDP growth for the year 2020-21 is estimated at 10%, on the basis of trends available.  Accordingly, receipts for 2020-21 are estimated at Rs22.46 lakh crore and expenditure estimated to be Rs 30.42 lakh crore. Fiscal deficit of 3.8% in RE 2019-20 and 3.5% in BE 2020-21. The central government’s debt has come down to 48.7% in March 2019 from 52.2% in March 2014.

Individual Tax Payers

Significant tax reforms have been undertaken. To provide significant relief to individual tax payers and simplify tax law, a new regime of personal income tax is being introduced. Around 70 of more than 100 income tax deductions and exemptions have been removed in order to simplify tax system and lower tax rates.

  • Under the new personal income tax regime, individual tax payers to pay tax at reduced rate of 10% for income between Rs5 lakh and Rs 7.5 lakh.
  • For income between Rs7.5 lakh – Rs 10 lakh, tax rate will now be 15% against the current 20%.
  • For income between Rs 10 lakh – Rs 12.5 lakh, the new tax rate will be 20%, down from 30%.
  • For income between Rs 12.5 lakh – Rs 15 lakh, tax rate will be 25%.
  • Income above Rs 15 lakh will continue to be taxed at 30%.

The new personal income tax regime is optional for taxpayers and the new tax rates are without deductions available under the old tax regime. Those who wish to claim rebates and concessions are free to file taxation under the old regime. Under the Vivad Se Vishwas Scheme, taxpayer can pay only the amount of disputed tax, will get complete waiver on interest and penalty, if scheme is availed by 31 March 2020

Dividend Distribution Tax is being removed and companies will not be required to pay DDT; dividend to be taxed only at the hands of recipients, at applicable rates. Concessional corporate tax cut will be extended to new domestic companies engaged in power generation.

The finance minister says GST has resulted in efficiency gains in transport and logistics sector while inspector raj has vanished. It has benefitted MSMEs.

Industry & Commerce

Rs27,300 crore has  been earmarked for development of industry and commerce. Investment Clearance Cell will provide end-to-end facilitation, support and information on land banks. The scheme is focused on encouraging manufacture of mobile phones, electronic equipment and semiconductor packaging to be introduced.

National Technical Textiles Mission will be introduced, with a four-year implementation period, with an outlay of Rs1480 crore.

To achieve higher export credit, a new scheme is being launched which provides higher insurance cover, reduced premium for small exporters and simplified procedure for claim settlements.

Project Preparation Facility will be set up for preparation of infrastructure projects, actively involving young engineers and management graduates.


Rs 1.7 lakh crore will be provided for transport infrastructure in the coming financial year. 100% tax concession to sovereign wealth funds on investment in infra projects. Accelerated development of highways will be undertaken. Delhi-Mumbai Expressway and two other projects will be completed by 2023. 100 more airports will be developed by 2024 to support the UDAN scheme. More Tejas like trains to be introduced. Rs 22,000 crore for power and renewable energy sector in 2020-21. Large solar power capacity to be set up alongside rail tracks, on land owned by Railways. Fibre to Home connections under Bharat Net will be provided to 1 lakh gram panchayats this year itself, 6000 crore rupees provided for Bharat Net. Some Rs 30,757 crore earmarked for Union Territory of Jammu & Kashmir Rs 5,958 crore for Union Territory of Ladakh.

Agriculture & Allied Activities

The finance minister has announced a 16-point action plan for farmers, towards the goal of doubling farmers’ income by 2022. Rs2.83 lakh crore is allocated for agriculture and allied activities, irrigation and rural development. Agricultural credit target has been set at Rs 15 lakh crore. NABARD Refinancing Scheme to be further expanded. Comprehensive measures proposed for 100 water-stressed districts being proposed. For better marketing and export, supporting states will focus on one product for one district, so that high focus is given at district level for horticulture to gain momentum.

Financing on Negotiable Warehousing Receipts will be integrated with e- National Agricultural Market. Krishi UDAN will be launched by the ministry of civil aviation on international and national routes, improving value realization in North East and tribal districts.

Indian Railways will set up Kisan Rail through PPP arrangement for transportation of perishable goods Farmers who have fallow or barren land will be helped to set up solar power generation units and also sell surplus power to the solar grid.

Pradhan Mantri KisanUrja Suraksha evam UtthanMahabhiyan (PM KUSUM) will be expanded to provide 20 lakh farmers in setting up standalone solar pumps. Milk processing capacity to be doubled by 2025

Village Storage Scheme run by SHGs, will provide holding capacity for farmers, women in villages can regain their status as Dhaanya Lakshmi.  Warehouses will be set up, viability gap funding to be provided to set up warehouses.


Rs 99,300 crore is provided for education sector in 2020-21 and Rs3,000 crore for skill development. Degree-level full-fledged online education program to be offered by institutes in top 100 in National Institutional Ranking Framework.

The government proposes to set up National Police University and National Forensic University.

BetiBachaoBetiPadhao has given tremendous results, Gross Enrolment Ratio is now higher for girls than for boys at all levels. GER for girls is 94.3 at the elementary level.


Budget 2020 provides an additional Rs 69,000 crore for the health sector. Govt to expand Mission Indradhanush, add more hospitals to Ayushman Bharat. A medical college will be attached to each district hospital in PPP mode. Viability gap funding will be set up for setting up such medical colleges. Rs 35,600 crore outlay made for nutrition-related program in 2020-21.

Empowerment, Welfare

Rs 28,600 crore provided for programs which are specific to women. Rs 85,000 allotted crore for Scheduled Castes and Other Backward Classes in 2020-21, Rs 53,700 crore for scheduled tribes and enhanced allocation of Rs 9,500 crore for senior citizens and Divyangjan.

Budget reactions

A.K. Das, Managing Director & CEO,  Bank of India: Budget 2020-21 is forward looking in as much as it aims to revive demand and elevate economic growth.  Higher allotment of budget for rural, education and infrastructure pipeline is certain to improve effective demand. Other feel good elements of the Budget include sizeable increase in DICGC insurance threshold, subordinate debt facility and extension of restructuring window for MSMEs, Liquidity support to NBFCs and Tax holiday in the affordable housing segment.  These, along with, rationalization of taxes are likely to revive demand and bring about impetus in the real sector.

 Nilesh Shah, MD & CEO, Kotak Mahindra Asset Management:  The budget is good on intent. However, the key is efficient execution in a time-bound manner. There are many positives to simplify things and encourage entrepreneurs but again, key will be execution in a time-bound manner. Intent needs to be converted into implementation.

Upasna Bhardwaj, Economist, Kotak Mahindra Bank: The budget seems largely on lines with expectations with the fiscal deficit in FY20 pegged at 3.8% and 3.5% for FY21. The net market borrowing for both this year and next year is marginally lower than expectations, which could provide brief respite to the bond markets. Further, aiding sentiments could be a more realistic nominal GDP growth assumption of 10% and the related tax and expenditure growth. The income tax tweaks should help in boosting consumer confidence and demand raising hopes of a revival in growth. Meanwhile, the focus on infrastructure, agricultural warehousing, education and manufacturing sector should help ease structural bottlenecks over the next few years.

Balasubramaniam, MD and CEO, of BSE’s India International Exchange:India INX is fully geared up and ready to launch Rupee Dollar Futures and Options contracts trading as soon as approvals are received from regulators. Further he said that we will also be keen to set up the International Bullion Exchange at GIFT IFSC. The budget announcement by the finance minister to reduce the withholding tax from 5% to 4% for IFSC Exchange listed bonds will be an immense boost to all issuers and will immensely help them in attracting more international investors. Índia INX has already listed MTN programs worth USD 47 billion dollars with drawdown of USD 18.5 billion dollars till date. This announcement should greatly incentivise issuers to choose Índia INX as the preferred platform for listing their international bonds and masala bonds.

Anand Kumar Bajaj, MD & CEO, PayNearby: Like cash back by startups being removed after habit formation, the removal of tax deductions with reduced tax rates is an intelligent move after creating habit of investment, saving and insurance. People would still continue to invest, save even without tax deductions. DDT removal will help invite investments in the sector. Continued support and expectation from Startups is appreciated. ESOP tax restructuring is a great breather along with definition of turnover for scaled startups doing good work. Few master strokes in the key required areas will help India evolve at multiple levels with connectivity to Aanganwadi plus NGOs in hinterland to enable balanced trade through connectivity. Supporting hand to perishable produce with refrigerated train wagons along with geo tagging cold storages with help of NABARD will help reach perishable produce to nearby warehouses in best manner. Unified employment exams will help ease of living for youth and Tax harassments will be moderated for sincere tax payers will build confidence in MSME and corporates.

Rajesh Srivastava, Executive Chairman, Rabo Equity Advisors: This year’s budget is particularly aimed at promoting smart irrigation, liberalization of agricultural markets and addresses several concerns of farmers such as agricultural credit, production incentives, cold supply chain, farmers’ insurance, pushing farmers’ income and much more. Some great announcements which we highly appreciate include setting up of the agricultural credit target at Rs 15 lakh, allocation of Rs 2.83 lakh crore for agriculture, provision of standalone solar pumps to 20 lakh farmers under PM Kusum scheme. Setting up of Kisan rail through PPP arrangement, for transportation of perishable goods, launch of Krishi UDAN by Ministry of Civil Aviation on international and national routes are equally commendable moves and truly show the feel for woes of farmers. There is a lot for foreign investors both on equity and debt side. Removal of dividend distribution tax, tax holiday on investments in notified sectors with a lock in of 3 years, concessional withholding tax of 5% up to 30/6/23 to FPIs and QFIs and massive incentive for talent in start-ups are solid measures to improve the climate. For MSMEs there is bounty in terms of ease of access to financing and also compliance. I am not worried on fiscal deficit at 3.8%, since the given incentives should adequately raise GDP in next 2 years to do more than catching up with targets under FRBM.

Jonathan Bill, Co-founder & CEO, CreditMate: CreditMate welcomes the establishment of greater Indian data centers and facilities as announced by Finance Minister in the Union Budget 2020. We place high emphasis on data security and data sovereignty, providing a superior and fairer borrower experience and an environment where contact between collectors and collection agencies is transparent and can only happen through our platform. Any move that gives parity or advantage to ESOPs or privately held shares with publicly traded shares is a significant boost to founders and early employees of new companies where risk is greater and salaries often lower. Such moves and treatment in other markets where entrepreneurialism is encouraged by positive policies and taxation have proven to drive a significant and dynamic startup ecosystem which also benefits the wider economy and culture.

Balu Nair, Interim CEO at Metropolitan Stock Exchange: There are several big highlights for the financial markets in this year’s Budget. The first is the abolishment of dividend distribution tax, which has been a long standing demand of the market. The introduction of tax holidays for startup ESOPs is highly significant as well. These definitely should help the equity market. Equally, there are several incentives for the development of the debt market with the focus on attracting foreign investors, whose presence in this segment would be highly beneficial. The LIC listing will be eagerly awaited by investors and will provide huge fillip to capital raising through the primary market.

Sharad Kumar Saraf, Federation of Indian Export Organisations (FIEO): The union budget has attempted at structural changes in agriculture, horticulture and pisciculture, through 16 Action Points, to make India a major player in agro and allied sectors exports in medium to long term basis. The scheme of NIRVIK will ease the lending process and enhance the availability of credit to exporters. Under the Scheme, the insurance over guarantee will now cover upto 90% of the principal and interest both on pre & post shipment credit. The ECGC currently provides such guarantee only up to 60% of the loss to the banks. The premium for the coverage will also get reduced thereby benefiting the MSME exporters. This in turn is expected to enhance accessibility and affordability of credit to exporters, besides, less provision requirement and liquidity due to quick settlement of claim ensuring availability of adequate working capital to the export sector.

Dr B.V. Mehta, ED, SEA: We would complement Finance Minister for focusing on farming  and announcing number of measures to boost the farming and also review the rules of origin and tightening the Safeguard measures to check the spurt in import under Free Trade Agreements and pleased to attach the Prime Minister’s 16 point program for the agriculture sector and highlights of  her speech. But vegetable oil industry disappointed.

Dr. Keshab Panda CEO & MD, L&T Technology Services: From a perspective of the engineering and technology services industry that thrives on innovation, the government’s move to re-revitalize the IP filing and protection process is a welcome step. Additionally the thrust on quantum computing as a key focus promises to further consolidate India’s position in the global digital transformation landscape. The announcement of proposal to set-up Data Centers is also a step in the right direction in terms of acknowledging the importance of data and data analytics.

S.R. Patnaik, Partner & Head – Taxation, Cyril Amarchand Mangaldas: The FM has accepted the demand of the industry to reverse the taxability of dividends back to the recipients. Now dividends will be taxed in the hands of recipients. She also referred to deductibility of dividends received by a holding company.

Dinesh Kanabar, CEO, Dhruva Advisors: Having a Charter for Tax Payers is welcome and having it enshrined in the Act, even more welcome. That said, it needs to be implemented in spirit and for that changes in mindset need to be made at the ground level.

Dr Niranjan Hirandani, President ASSOCHAM: Budget 2020 sets right directional tone, lacks economic stimulus. The Budget overall was good in intent in which all important and necessary sectors were touched upon and a growth trajectory was chalked out. However, we feel the spending on each sector could have been doubled as compared to what has been allotted. Overall, I feel that the Finance Minister did not take the bull by the horns. Second part of the budget was the wellness of the nation where again, the needs of all the sectors were addressed. Setting up of standalone solar pumps will reduce power consumption by the farmers by almost 50 per cent and also the government can expect to recover the cost of installation in the next two years. On the water problem front, with the amount of expenditure that has been laid out in Budget 2020, I doubt it will solve the water crisis in every segment of the society.

The idea of appointing fresh engineers in the urban local bodies as apprentices is a welcome step. As an industry body, we have found that workable skill-sets are missing in most fresh graduates. The focus on urban infrastructure is there in the budget, however, the thrust that was needed is inadequate.  The roads which are being built at a  rate of 35 km per day should have been at least 70 km per day which is an achievable target. For the industry, abolition of Dividend Distribution Tax (DDT) is a welcome move.

Ashishkumar Chauhan, MD & CEO, BSE: Budget 2020 is inclusive, growth oriented budget to achieve US$ 5 trillion economy. The FM has delivered a growth, consumption and job-oriented blueprint for the economy and has covered every aspect of the economy. Proposal to divest government stake in IDBI bank and IPO of LIC also will bodes well from the capital market perspective and potentially attract more retail investors. Notable measures, amongst others, include removal of dividend distribution tax, setting up of Bullion Exchange(s), introduction of rupee derivatives and reduction of the withholding rate from 5% to 4% on interest payment on the bonds listed. Raising the turnover threshold for audit from the existing Rs 1 crore to Rs. 5 crores, raising of customs duty on select labour intensive sectors will ensure ease of doing business and make MSME’s competitive in the global export markets. 100% tax exemption to foreign investors’ interest, dividend and capital gains income in respect of investment made in infrastructure and other notified sectors by Sovereign Wealth Funds, concessional withholding rate of 5% for FPI’s and QFI’s.


Naveen Surya, Chairman, Fintech Convergence Council:  “I would like to congratulate the government for putting out a pragmatic budget plan. The Union budget 20-21 has invariably used Artificial intelligence, machine learning, IoT, UPI among others quite many times probably for the first time. thus the intent seems to be very clear – a strong drive towards an all-growing digital economy. Addressing the weakness in consumption, partly due to the liquidity squeeze gripping the non-bank lenders, was critical for the revival of economic growth. Tax cuts for individual taxpayers are a huge positive on that front. However it would have been great to see some action like special Income Tax/GST exemptions and concessions for these type of services.

G Murlidhar, Managing Director, Kotak Mahindra Life Insurance: The budget addresses all the priority areas with a fair increase in allocations to infrastructure, rural development, health and agriculture. Increase in government expenditure can provide the necessary stimulus for growth. With regard to individual tax regime, we need to wait and observe whether and what proportion of taxpayers opt for the reduced tax rates, and what effect it has on the savings culture of households. IPO of LIC and selling stake in IDBI Bank are bold steps. It makes sense to fund productive investments like infrastructure through such resources. Overall it is a commendable effort not to stray too far from the path of fiscal discipline despite the increase in allocations.

Chandra Shekhar Ghosh’s , MD & CEO, Bandhan Bank : This is a holistic budget that takes into consideration the needs of various sections of the population. PPP model is pronounced in this budget and this is indicative of the government’s focus on involving private sector towards building aspirational India. The increase in deposit insurance to Rs.5 lakh will help drive confidence among banking customers. The new rules in individual tax will help drive consumption as also give the tax payer the option of using tax saving investments for future use. The announcements in education, skill development, health, farming, MSME, infrastructure development, energy, and new age industries should help boost the economy.


Ketan Gaikwad, CEO, Receivables Exchange of India: FM Nirmala Sitharaman has introduced a series of measures, in line with the recommendations of U. K. Sinha Committee, to support the MSMEs through easy liquidity, greater business opportunities, and operational efficiency. Some of these measures will help in the greater participation on the trade receivables discounting platform (TReDS), which is a unified platform for MSME sellers, their large buyers which includes PSUs and Corporates, and financiers, to facilitate timely payments and secure credit on more favourable terms. Government e-Marketplace (GeM)  provides MSMEs with a great opportunity to sell to these buyers. Currently about 3.24 lakh vendors are registered on the Public platform Government e-Marketplace (GeM). Public procurement worth Rs 50,000 crore is expected to take place through GeM during 2019-20, up from Rs33,366 crore in the previous year. The budget proposes to take its turnover to Rs3 lakh crores. For the proposed turnover mandate, it is necessary to have the alternate financing mechanism in place, the integration between Trade Receivables Discounting System (TReDS), and GeM is underway, this integration will allow PSUs/Govt departments to do procurement without blocking their own funds, while ensuring timely payments to MSMEs.

Ms. Sitharaman has also emphasized that the government will allow NBFCs to participate in TReDS, with due amendments in the Factoring Act 2011. Expanding the spectrum of financiers allowing NBFCs to participate on TReDS platform for financing can be a game changer as the NBFCs can take risks on these corporates, this will uplift the transacted volumes on TReDS exchanges, the benefit of quick finance for supplies could be extended to many more MSMEs. As per budget, an app-based invoice financing loans product will be launched to alleviate the problem of delayed payments and cash flow mismatches for MSMEs. App based invoice financing is essentially a lending product that eliminates the need for the buyer to accept the invoices and is with recourse to the seller. MSMEs can obtain invoice-wise financing against their supplies immediately based on the invoices filed and their verification from GSTN, the GSTN history of the MSME, cash flow analysis based on account statement and risk scoring accordingly. This lending is completely digital and detailed guidelines are awaited. This measure will expand the market and will provide greater flexibility to the MSMEs to obtain easy liquidity.

Pramod Kumar Agrawal, Chairman, The Gem and Jewellery Export Promotion Council (GJEPC): The industry is in a state of surprise to know that the government has proposed to levy import duty on rough colored gemstones, rough semi-precious stones and pre-forms of precious and semi-precious stones from nil to 0.5 percent. G&J industry requests government to roll back this import duty. The move will impact the 4 lakh workers in Rajasthan, the hub of processing and cutting of colored gem stones. India competes in exports in this segment with China and Thailand. The industry welcomes reduction of import duty on Platinum from 12.5 percent to now proposed 7.5 percent. Also, we believe the NIRVIK Scheme would result in increase of the export credit disbursement to the gems and jewellery sector. Also, we understand that the government has now equated the gold bullion sector under single import duty regime by increasing the import duty on gold coins from 10 percent to 12.5 percent. Our demand was to decrease the import duty on bullion to 4 percent from 12.5 percent. The industry feels that the establishment of bullion exchange is a positive move, as it will attract more international bullion trade to happen in India.


Sanjay Jalona CEO&MD, L&T Infotech: “Acknowledging the influence of technology in shaping new age economy is a distinct aspect of the Union budget. Focus on artificial intelligence and targets set for quantum computing is a step in the right direction to strengthen India’s position as a frontrunner in exponential technologies. From IT services perspective, it will be interesting to see if setting up more export hubs is encouraged by incentives for the industry that has been at the forefront of exports for the country.”

Ravi B. Goyal, chairman & MD AGS Transact Technologies: “The removal of dividend distribution tax will reassure the flow of FDI and make Indian equities more attractive. This year’s budget focused on entrepreneurship and early stage start-ups and the FM has provided a series of measures that will encourage Indian start-ups whilst focusing on positioning entrepreneurs as job creators. The overall focus on boosting transport infrastructure will help pursue greater commercialization of highways to raise finance operating road assets. Recent developments to promote digital payments such as zero MDR are pre budget announcements and there was an expectation of a clear roadmap from the government on supporting digital payments infrastructure given the sector will be a major catalyst towards achieving the $5.5 trillion target.

Dhirendra Mahyavanshi, Co-Founder, Turtlemint, a tech platform for insurance: The new budget offers tremendous tax benefits to the average taxpayer helping him lower his tax liability considerably. Moreover, with the different social welfare schemes promised by the Finance Minister, the outlook looks positive. The insurance sector is also expected to see major impacts with the disinvestment in LIC. It would bring in fresh capital for the company helping it to make strategic future plans. The emphasis on digitization, tax benefits promised to companies, MSMEs and start-ups and the lowering of the tax rates would result in higher disposable incomes in the hands of tax-payers thereby promoting insurance investment. Thus, the insurance segment is poised to grow with the changes announced in the budget and the economy might also recover from the slowdown.


Nirmal Jain, founder & chairman, IIFL: “Expectations were very high and therefore market is a bit disappointed but there are a lot of incentives for the foreign investors. Dividend Distribution Tax (DDT) has been abolished and therefore obviously foreign investors will benefit but then it becomes fully taxable in the hands of shareholders which is not the right way of doing it because shareholders are also owners and as owners of the company they pay tax on profits and it gets taxed again. So, this might change the dividend culture of many companies, it will impact the private sector investment which has been very sluggish for the last 2 to 3 years at least.”

Brickwork Ratings: The budget this year was presented in the background of a slowing economy, poor investment climate, declining consumption demand and stagnant exports. It was hoped that the strong electoral mandate received by the government last year would propel it to embark on substantial structural reforms to reverse the trend and revive the investment climate to accelerate growth.

In fact, the Economic Survey that preceded the budget presentation declared, “The government must use its strong mandate to deliver expeditiously on reforms, which will enable the economy to strongly rebound in 2020-21”. Unfortunately, it falls short of delivering what the Economic Survey promised. There is no measure to create wealth in the budget as propounded by the Survey nor is there anything to generate an atmosphere of trust.


Joby C O, CEO, Dvara KGFS: “This Budget has acknowledged the larger role which NBFCs play in the Agri & MSME space & has proposed several measures to strengthen the Financial Inclusion space. Expansion of NABARD Refinance scheme in the agriculture credit space, amendments to the Factor Regulation Act (enabling NBFCs to extend invoice financing to the MSMEs through TReDS) & the implementation of Partial Credit Guarantee scheme are the key takeaways for NBFCs from this budget. I expect that these measures will ease out the liquidity stress & help in the revival of the NBFC & more specifically the microfinance sector.”

Ketan Patel–CEO, CASHe: Talent retention has been a major concern in the Indian startup ecosystem. The ESOP clarity in the budget has been the best move in the budget since it will help startups to retain talent and aid employees to exercise their options. This will boost the confidence of the employees joining startup organization. Change in the taxation of ESOPs was a foremost budget ask from many industry players and has been taken into the consideration by the government. Besides tax reforms is a good move since it will drive consumption in the economy which is the oil to the $5 trillion economy and improve customer sentiments. Millennials will have more spending power now which can be used for both investment and consumption purpose. Further, announcements such as setup of Data Centre Parks, Fibre to home will bring larger set of rural population on internet world which will help the fintech companies in India to expand and offer additional services to them. This will also lead to increase in job opportunities in rural region.”

Bhavin Patel, Founder & CEO, LenDenClub: As a startup founder, I found the ESOP tax issue as the best part of this budget. It will help hundreds of startup employees to have better clarity on converting their options. The increase in tax structure is also a good move. It will allow every taxpayer to have more disposable income. It will add up consumption in the economy. Government of India has also announced the setting up of ‘Data Centre Parks, Fibre to home’ which will encourage a larger set of rural population to get on the internet, which in turn provides an opportunity for fintech companies in India to expand and gain access to a diverse population, by offering additional financial services to them. This will also lead to increase in job opportunities in rural regions, and aid in the government agenda of widespread financial inclusion.”

Harshil Mathur, CEO and Co-founder, Razorpay said, “The budget does meet some of the expectations from the FinTech industry and startups. The introduction of some sort of a tax relief on ESOPs was one of the biggest asks from the startup industry – this deferment of tax payment by five years, to me, is one of the biggest welcome moves by the government in this budget. The reduction on corporate tax to 22% is an encouraging step. This is the lowest in the world and will be encouraging for Indian business’s. Lastly, the changed income tax slabs and rates is not only a huge income tax relief for individuals but will also lead to an increase in disposable income, thereby giving a boost to consumer spending.”

Vinay Bagri, Co-founder & CEO, NiYO – a neo-bank. The budget has lot of encouraging initiatives for the startup ecosystem in general such as establishing a seed fund for early stage start-ups and a centralized single window investment clearance cell. We also heartily welcome the tax deferment for ESOPs and believe this will enable greater wealth creation opportunity for startup employees and attract high quality talent to the start-up ecosystem. The government’s initiative to setup data center parks will enable fintechs like us working for financial inclusive for ‘Bharat’ get access to a wide range of reliable data and insights about customers.

Hemant Kanoria, Chairman, Srei Infrastructure Finance: The biggest takeaway is perhaps the announcement of allowing Sovereign Wealth Funds (“SWFs”) 100% tax exemption for investments in Indian infrastructure projects. The increase in the FPI limit for corporate bonds from 9% to 15%, coupled with the laying out of red carpet for the SWFs at this juncture, is very good news for Indian infrastructure projects as it will enable long term funds, both equity and debt, to be invested in India. One of the notable announcements is to bring the power sector in line with manufacturing companies and provide a concessional tax rate of 15% on the new domestic generation companies. However, I hope the existing power generation companies and the distribution companies should also be included in due course. I welcome the announcement that the Centre would now prod all state governments to adopt smart metering. This can do wonders in improving the financial health of the discoms. Given the huge inventory build-up in the real estate sector and the fact that this sector is a huge employment generator, I was expecting more incentives. The decision to liberalize External Commercial Borrowing (ECB) and Foreign Direct Investment (FDI) norms for development of institutes of higher skills is also very reassuring. If India has to emerge as a global power, we need to quickly scale up the capacity of our higher education ecosystem.

Dr Sangita Reddy, President, FICCI: Given the constraints that the Finance Minister was facing, the budget has been a significant balancing act between the need for growth and fiscal prudence. By invoking the deviation clause in FRBM Act and relaxing the fiscal deficit to 3.8 per cent in the current year and targeting 3.5 per cent in the next year, the government has underscored its resolve to support the economy at a time when it needs a fiscal boost. This was FICCI’s key suggestion to the government and through this we expect more money will be left in the hands of the people that will spur consumption and industrial growth. The government could also consider front-loading the payments under PM-KISAN in the coming year as this could help boost consumption in the rural economy. Reiteration of the importance of wealth creators in the society in the budget speech is also encouraging and should help build a positive environment for businesses in the country. The building blocks for growth of any economy are the social sectors such as healthcare, education and skill development. Each of these areas has got due attention with appropriate outlays in the budget and it is commendable that the government has kept its focus on the long-term goals and has not curtailed the resources allocated for the social sectors. The several small steps taken to boost entrepreneurship and employment will meet the aspirations of the youth of our country. The budget also laid a lot of emphasis on development of the industrial and infrastructure sectors.

Shanti Ekambaram, President, Consumer Banking, Kotak Mahindra Bank:

 It is a budget with something for everyone. While there is an allocation across many segments, it does not have a significant thrust on any one particular sector or a “Big Bang” announcement. A lot was expected on the big boost to Infrastructure, but perhaps the devil is in the details. Fiscal Deficit target for FY’20 as expected was revised to be higher at 3.8% and projected at 3.5% for FY ’21. Given the economic slowdown this will give a boost to government spending to support economic growth. The proposed LIC IPO and privatization of IDBI Bank were other big announcements. In addition, raising deposit insurance cover to Rs 5 lakh from the current Rs 1 lakh is significant and will give a big comfort to depositors Abolishing DDT and steps taken to deepen bond markets were positive. The rural economy including agriculture received a lot of granular allocation. In addition, linkages from farm to markets saw some positive announcements for storage, logistics amongst others.  MSMEs and start-ups got some succour. Education was emphasized as critical.

Nishith Desai, Founder, Nishith Desai Associates, a research based international law firm:  The Budget seeks to bring in a wide variety of complicated and substantive tax changes in the income tax act. One good thing that has happened in this budget is a proposal to incorporate Charter of Tax Payers Rights in the income tax act itself. While we still need to see the text, FM deserves real compliments for this fundamental initiative. We appeal to the Prime Minister and Finance Minister not to introduce substantive changes alongside the budget. They require dialogue with public and serious discussion in the Parliament. The biggest announcement is the removal of Dividend Distribution Tax (DDT). Shareholders will now have to discharge taxes on dividends received. This is a welcome move and comes as a huge relief to the foreign investor community who are often faced with the difficulty of not being able to claim tax credit in the country of residence or take benefit of withholding tax rates under the applicable tax treaty. While this creates significant benefits for foreign shareholders (including corporates and private equity investors), the trade-off is that for domestic shareholders, the taxes paid on amounts received as dividend may increase, depending on the tax rates applicable for such shareholders. On the flip side, Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) seem to be bearing the brunt of this change with dividend income which was earlier exempt from DDT now being subject to tax in hands of investors of the InvITs and REITs. The Budget has exempted income in the nature of dividend, interest or long-term capital gains earned by sovereign wealth funds through investments in the infrastructure space who fulfil certain criteria. Notably, the Abu Dhabi Investment Authority (ADIA) and its subsidiaries have been specifically exempted. Although, under some tax treaties, sovereign wealth funds are exempted, specific provisions under the Income Tax Act, 1961 (ITA) will provide more certainty and clarity in this respect. The intent behind this move is to encourage long term stable capital participation from sovereign wealth funds, to replace government spending in the creation of infrastructure assets and also foster economic relations with such countries. Providing certainty to non-resident taxpayers litigating the issue of attribution of profits to their business connections / Permanent Establishments (PEs) in India has been an oft repeated demand raised. The Budget proposes to include attribution of profits within the framework of the safe harbor rules and the Advance Pricing Arrangement regimes, which were hitherto limited to Arm’s Length Price determination.

Mahesh Balasubramanian, MD & CEO, Kotak Mahindra General Insurance: ‘This is a “ Laghe Raho” Budget as there were no quick fixes or grandiose plans but lots and lots of initiatives which will all help keep the economy on course for the 10% realistic Nominal GDP growth planned. Big spend push through National Infra Pipeline, Transport sector and 16 initiatives on Farm growth should help rural economy and growth. Fiscal deficit at 3.5% for Fy 21 is a relief as we stay the course and yet spend extra within limits. Disinvestments target of 2.1 L cr will have to be met through LIC, IDBI etc. Overall, time to switch of TV Channels and go back to the hard grind of execution to get the economy on track. So, as we chase the 5 tn GDP target, its ‘Lage Raho’ for now.’

Business Economics Banking, Yes Bank: In line with our expectation, the government invoked the escape clause to revise FY20 fiscal deficit higher to 3.8% of GDP vis-à-vis the initial target of 3.3%. Government expects to revert to the consolidation path by budgeting for a lower fiscal deficit target of 3.5% in FY21. While overall arithmetic appears broadly credible, the attainment of FY21 fiscal deficit target to hinge on realizing record high disinvestment target along with substantially higher telecom revenue. Although headline quality of fiscal spending is set for improvement amidst higher outlay for capex, the overall quality is likely to deteriorate amidst lower budgeted capex spending by PSEs. FY21 Budget takes forward the thrust on reviving rural demand and supplements it with sectoral incentives for electronics, exporters, textiles, MSMEs, Start-Ups, and affordable housing. Absence of any specific measure to revive beleaguered sectors like Real Estate and NBFCs/HFCs could act as a dampener. FY20 net g-sec borrowing target of INR 4.74 tn retained, in contrast to consensus expectation of additional borrowing. FY21 net g-sec borrowing at 5.45 tn. Assuming status quo on monetary policy until Sep-20, we retain our 10Y g-sec yield view at 6.3-6.7% range.

Mukesh Aghi, President and CEO, US-India Strategic Partnership Forum: USISPF is pleased to see a focus  on inclusive growth, aspirational India, ease of living for all citizens, and digital technologies for economic growth in the 2020 Union Budget . However, we believe the budget could have gone further to liberalize sectors such as insurance that are in need capital. Despite a slowdown in growth, the global outlook for investment in India remains strong and therefore the budget was a great opportunity to convert the global sentiment into action. We are particularly pleased to see the elimination of the dividend distribution tax.  Deferring the significant economic presence rules is an applaudable effort to align India’s digital taxation policy with global norms. On ease of doing business, measures such as simplified GST returns, no audit requirement for MSMEs with up to INR 5Cr turnover, pre-filing of tax returns, faceless appeals and assessments will further enhance India’s image from an ease of doing business perspective. Together, these steps show that India’s tax policy is moving in the right direction.

Directionally, we see provisions such as creation of an “Investment Clearance Cell” to facilitate investment advisory. As a USISPF hi-tech manufacturing report has indicated, India’s hi-tech manufacturing sector has the potential to offer an additional investment of USD 21 billion and create 550,000 direct jobs and 1,400,000 indirect jobs over the next 5 years.” However, we urge the government to move away from further tariffs on ICT products in the budget. It is important for government to continue to improvise its Make in India program. Global companies are looking for alternative sites in Asia and India is uniquely placed to be that destination. Improving India’s logistics and infrastructure build-out is one area where American companies can contribute significantly. We are encouraged to see a focus on digital infrastructure that will enable private sector to build data center parks throughout the country as well as public funding for the Bharatnet program.

Deferring the tax payment on ESOP granted to employees; and increasing the revenue threshold to INR 100 Cr for claiming profit exemption for a period of 3 years out of first 10 years will allow startups to create jobs and attract more skilled talent.  USISPF will work with the government on additional steps it can take to further boost the startup ecosystem in India. Ecommerce is a bright spot of the Indian economy and expected to touch $84 billion by 2021. We. therefore, urge the government reconsider its decision to impose 1% TDS on e-commerce.

Given the political and fiscal constraints facing the government, we complement Prime Minister Modi and Finance Minister Sitharaman for balancing different priorities.

Ramki Gaddipati, CTO & Co-Founder Zeta: As an entrepreneur I’m happy to see the proposal to set up investment clearance and advisory cell. This will further encourage the startup community. Setting up data centre parks aimed to benefit tech service companies is a welcome move too and we look forward to details. One of the most significant step is the proposed deferring of the tax payment on ESOPs. This is a very welcome move. At a time when we are seeking simplified process and structures the proposed Income Tax structure seems to have become more complex. We hope to get more clarity on this point.

Navneet Munot, ED & CIO, SBI Mutual Fund: This was amongst the toughest backdrops in recent years. The FM has ended up using the FRBM deviation of 50bps on fiscal deficit for both the current and the next year. The divestment target at Rs 2.1 trillion while ambitious will need support from strategic sales including the proposed LIC of India IPO. Overall, the government appears to have chosen to consolidate on the reforms of the past few years. Full tax exemption to Sovereign Wealth Funds for investments in Infrastructure and other notified sectors is a significant positive. It was also heartening to see the focus on sustainability through measures on environment and climate change. Similarly, the continued focus on cooperative federalism is positive.

The personal tax reductions are well intentioned but the flip side is that removal of exemptions could have negative implications for savings. More could have been done for the real estate sector. After the initial reaction, expect investor focus to shift back on earnings and global cues. In our view, significant easing in financial conditions, both locally and globally, improving prospects for the rural economy given increase in food prices and better acreage, and the various measures taken by the government to stimulate the economy so far should bring about an improvement in both economic activity and corporate earnings going forward. However, in the absence of a significant growth boost in the budget and given the cautious global environment owing to the spread of Coronavirus, market should stay volatile in the near-term.”

Vijay Kumar, MD & CEO, NCDEX: The village storage scheme by Self Help Groups (SHGs) shall play a crucial role in farm level warehousing and will help farmers in efficient post-harvest management. The Exchange has also taken note that the government will provide viability gap funding for setting up such efficient warehouses at the block/taluka level. Further, the Exchange is pleased to note that the financing on Negotiable Warehousing Receipts (e-NWR) has crossed more than Rs6,0,00 crores and it will be integrated with National Agriculture Market (e-NAM). The announcements to provide fund allocation of Rs. 2.83 lakh crore to agriculture, irrigation and rural development will provide impetus in re-energizing the sector. NABARD’s re-finance scheme backed with agriculture credit target being expanded to Rs15 lakh crore will give stakeholders easy access to finance and it will boost gri growth. NCDEX welcomes the 16-point agenda for the development of agriculture and the Government’s goal of doubling farmers’ income.

Pankit Desai, Co-founder CEO, Sequretek, cybersecurity startup: FM gave us a pleasant surprise by announcing Rs 8,000 crore on National Mission on Quantum Technologies and Applications. For companies like ours in cybersecurity space, it is a good move if it becomes a model for creating a replicable cyber forensics setup. Today each state has its own setup and there are some universities that have build out capabilities, but there is no standardization. With increased cyberattacks, the need for a national capability to identify the perpetrators and supporting law enforcement would be welcome. Devil lies in detail, though, so we will need to understand these initiatives once the fine print is available. Having said that, Startups are finding quite a bit of mention in the budget, making them a key part of the growth strategy. We are happy to see that the representations done by the startup ecosystem seem to have found resonance in the budget.

Kalpit Jain, Group CEO, Netcore Solutions: For a global technology player like us, setting up of data parks in India is a welcome move as this will ensure enhanced data safety because servers and allied infrastructure is likely to be hosted in India, globally benchmarked practices of data encryption will ensure that customers’ data is not misused or profited from as the momentum around Data Protection Law gathers steam. This may just be a pre-cursor to that. While we await for the finer print, programs like Knowledge Clusters should help younger tech companies in securing their IP and safeguarding their core product codes. It will also motivate them to apply AI, ML and deep tech for more refined solutions of existing problems in the country.

Prasanna, Group Head, Global Markets, Sales, Trading & Research, ICICI Bank: The first Budget of the new decade appropriately focused on holistic growth objectives. The proposal of encouraging foreign flows into education is encouraging. The focus on digitization to facilitate governance has been given a commendable priority and was underscored in this budget as well. The idea of disclosing extra budgetary borrowings in the budget document is laudable as transparency would be welcomed by the investor community. The restructuring of personal income tax rates and dividend distribution tax will help in reviving sentiment and boosting consumption demand especially at a juncture where the growth impetus has been receding. Other targeted reforms undertaken such as extension of incentives for affordable housing and incentives for export credit are also welcome. The decision to divest a heavyweight such as LIC is bold and will help to augment the financing kitty significantly. The proposal to set up the Investment Clearance Cell, which will facilitate a single point support structure is a welcome move and will further ameliorate our “ease of doing business”. We are also heartened that the Government has not cut capital expenditure and has retained its focus on improving the quality of the overall spending.

In view of the fact that India requires considerable capital flows to augment our savings the move to enhance limits for FPI holding in corporate bonds and tax free incentives for sovereign wealth funds are positive measures.

RM Vishakha , MD & CEO, IndiaFirst Life Insurance: Risk management through insurance is an essential part of nation building. In India, the construct has always nudged future savings and risk management through encouraging conscious investment towards the same aided by tax relief. We have not seen announcements that will encourage risk management practices.”