One of the focus of the budget was to make India “investor friendly” for Indian and foreign capitalists. This simply means that the Modi government will help the capitalists to earn profits higher than in other countries, to pay as little tax as possible, to allow them to bring and take out the capital without any restrictions.
Some of the measures announced are:
- So far for a new company with a turnover up to Rs. 25 crore, deduction of 100% of profit was allowed for three years. This tax concession has now been extended to new companies with turnover up to Rs 100 crore.
- Funds owned by foreign govern-ments will have to pay no tax on their interest, dividend, and capital gain income from investments they make in infrastructure and other notified sectors before 31 Mar 2024.
- Foreign funds have been demanding that they should be allowed to increase their investment in corporate bonds. They want to take advantage of the higher interest rate prevailing in India compared to their countries. The limit has therefore been raised from 9 to 15% of total bonds.
- The Budget acceded to the long-standing demand for the abolition of tax paid by companies on tax they were paying dividends paid to shareholders. Since companies had already paid tax, recipients of dividend were not required to pay any tax on their dividend income. With the abolition of the tax on dividends paid by companies, recipients of dividend will be required to pay tax on their income. This change announced in the budget is particularly beneficial to foreign investors. Firstly, net profit of companies will increase so they will be able to pay more dividend. Secondly, foreign investors generally invest in India out of countries which have no income tax or very low tax rate. So, they will also have to pay no tax dividend income they earn.
- The government had announced concessional corporate tax rate of 15% in Sep 2019 for new manufacturing companies. This concessional rate will now also be available to new electricity generation companies.
- FDI will now be allowed in higher education institutions. These institutions will now also be able to take loans for foreign sources. This means that Foreign universities will now be able to bring in funds and set up centres at Indian institutes. On the other hand, there has been negligible increase in the budget for higher education. After encouraging the privatization of higher education, the government now wants to handover higher education to foreign universities.
- The government has put in Rs. 2.7 lakh crore of public money into public sector banks between 2017-18 and 2019-20 to make up for the losses incurred by banks due to write off of loans capitalists refused to pay.
The budget slashed the food subsidy bill by a staggering Rs. 69,000 crore, despite worsening food security situation in villages. In fact, the Economic Survey released on 31 Jan 2020 advised the government to reduce coverage under the National Food Security Act, 2013, to the bottom 20% of India’s population, compared to 67% now. The fertiliser subsidy has been cut to Rs. 71,309 crore for 2020-21 from Rs. 79,996 crore in 2019-20.
All the above concessions to capitalists are being funded through the cuts in various supports given to people.