Union Budget 2020 – Highlights, Key Takeaways, Detailed Analysis & Impact on various Sectors

With the economy hitting a six-year low GDP growth, Union Finance Minister Nirmala Sitharaman presented the Budget 2020 on Saturday 1st February 2020 that focused on raising the purchasing power by cutting income tax rates and boosting rural income. Finance Minister Nirmala Sitharaman today delivered the longest budget speech in six years of the Narendra Modi government. She started her address in the Parliament by paying homage to her predecessor, the late Shri Arun Jaitley. She said "People of India have unequivocally given their Janaadesh for not just political stability, but have also reposed their faith in our economic policy.This is a budget to boost their income and enhance their purchasing power.”

This was the longest Budget speech by any finance minister, going beyond 2 hour 30 minutes. Sitharaman, 60, broke her own record of a 2-hour-17-minute-long maiden Budget speech in July 2019.Finance minister Nirmala Sitharaman’s second budget speech was 18,971 words long.

The Union Budget has been structured on the overall theme of “Ease of Living.” This has been achieved by farmer friendly initiatives such as Agriculture credit target of Rs 15 lakh crore for 2020-21; schemes of “Kisan Rail” and “Krishi Udaan” for a seamless national cold supply chain for perishables; and expansion of PM-KUSUM to provide 20 lakh farmers for setting up stand-alone solar pumps.

In the health sector, the Budget proposes more than 20,000 empanelled hospitals under PM Jan Arogya Yojana for poor people; and expansion of  Jan Aushadhi Kendra Scheme to all districts offering 2000 medicines and 300 surgicals by 2024.

Infrastructure receives a boost, with 100 more airports by 2024 to support Udaan scheme; and operation of 150 passenger trains to be done through PPP mode.

Starting apprenticeship embedded courses through 150 higher educational institutions by March 2021 and a proposal to establish Indian Institute of Heritage and Conservation are some of the other major highlights.

The Finance Minister said that the Union Budget Aims:

    • To achieve seamless delivery of services through Digital governance
    • To improve physical quality of life through National Infrastructure Pipeline
    • Risk mitigation through Disaster Resilience
    • Social security through Pension and Insurance penetration.

The Union Budget 2020 is based on three themes -

Three prominent themes of the Budget

  • Aspirational India - better standards of living with access to health, education and better jobs for all sections of the society
  • Economic Development for all - “Sabka Saath , Sabka Vikas , Sabka Vishwas”.
  • Caring Society - both humane and compassionate; Antyodaya as an article of faith.
  • Three broad themes are held together by:
    • Corruption free, policy-driven Good Governance.
    • Clean and sound financial sector.
  • Ease of Living underlined by the three themes of Union Budget 2020-21.

Three components of Aspirational India

  • Agriculture, Irrigation, and Rural Development
  • Wellness, Water, and Sanitation
  • Education and Skills

Following are Key Budget takeaways:
- Govt to raise funds via listing of LIC
- Deposit insurance raised to Rs 5 lakh
- FY21 fiscal deficit target pegged at 3.5% of GDP
- FY20 fiscal deficit at 3.8% of GDP vs earlier target of 3.3%
- Companies Act to be amended to decriminalise civil offences
- FY21 nominal GDP growth pegged at 10%
- To bring new education policy; allocates Rs 99,300 crore for sector in FY21
- 100 more airports to be developed by 2025 to support UDAN scheme
- To introduce a new simplified personal tax regime
- No income tax for income up to Rs 5 lakh
- 10% income tax for those earning between Rs 5 lakh to Rs 7.5 lakh versus 20% earlier
- 15% income tax for those earning between Rs 7.5-10 lakh versus 20% earlier
- 20% income tax for those earning between Rs 10-12.5 lakh versus 30% earlier
- 25 income tax for those earning between Rs 12.5-15 lakh versus 30% earlier
- Income above Rs 15 lakh to continue to pay tax at 30%
- New income tax scheme is optional, without exemptions
- Dividend Distribution Tax (DDT) abolished, shifted to individuals instead of companies
- 100% tax exemption on Sovereign Wealth Funds' India investments
- Tax holiday for affordable housing extended by one-year
- To amend I-T Act to allow faceless appeals
- FY21 divestment target: Rs 2.1 lakh crore versus FY20 target of Rs 1.05 lakh crore
- To launch new direct tax dispute settlement scheme; interest, penalty waived till March 31, 2020
- Excise duty hiked on tobacco, cigarettes raised
- FM Sitharaman expects market to recover on Monday, February 3
- Defence budget hiked by 6% from Rs 3.1 lakh crore to Rs 3.3 lakh crore

Highlights Of Union Budget 2020:

Budget Highlight: INCOME TAX:

The income tax rates have been revised.

  • 5% tax for income between Rs 2.5-5 lakh
  • 10% tax for income between Rs 5-7.5 lakh as against 20%
  • 15% tax for income between Rs 7.5-10 lakh as against 20%
  • 20% tax for income between Rs 10-12.5 lakh as against 30%
  • 25% tax for income between Rs 12.5-15 lakh as against 30%
  • 30% tax for income above Rs 15 lakh
  • Income tax rates will be significantly reduced for those who forego reliefs, exemptions, said Finance Minister

Budget Highlight:HEALTHCARE

  • Rs 690 billion will be spent toward healthcare spending

Budget Highlight: TRANSPORT

  • 100 more airports are planned by 2024
  • Over 6,000 km of highways in 12 lots will be monetized by 2024
  • One major airport will be privatized
  • High-speed train between Mumbai and Ahmedabad will be actively pursued, Nirmala Sitharaman says while presenting Union Budget 2020.


The government is committed to doubling farmers' income by 2022, the Finance Minister said, as she proposed to allocate Rs 2.83 lakh crore for agriculture and rural sectors such as irrigation.

Budget Highlight: MANUFACTURING

  • Schemes that encourage manufacturing of mobile phones, electronic equipment and semiconductor packaging will be introduced
  • Private sector to build Data Centre Parks throughout the country will be encouraged
  • 80 billion rupees over five years to be provided for quantum technologies and applications
  • Milk processing capacity to be doubled by 2025


Insurance cover for bank depositors to be raised to Rs 5 lakh from Rs 1 lakh

Budget Highlight: INFRASTRUCTURE

  • 5 new smart cities in public-private partnership mode
  • Delhi-Mumbai Expressway to be completed by 2023
  • 100 more airports to be developed by 2024

Estimated nominal GDP growth rate for 2020-21 is 10 per cent, said Finance Minister Nirmala Sitharaman. Wealth creators will be respected in this country, tax harassment will not be tolerated, she added.

Impact of Budget 2020 on Various Sectors:
- The focus is now on what will be its impact in reviving economic growth.
- Push for investments in its industrial sector and push for India’s participation in the global value chains. 
- Another focus area of the government is to increase investments in infrastructure.

Overall, the Budget provides a set of measures to help progress across various areas of the economy. Government is hoping that this will improve the trust within the industry to get their animal spirits going.

Budget 2020 Impact On: Income Tax - The biggest focus before and after the Budget was on changes in the personal income taxes.

Union Finance Minister stated that the tax proposals would bring ease of compliance and reduce litigation. She said that new personal income tax regime would be reduced who forego deductions and exemptions. New Income Tax slabs are as follows:

Tax Rates as per the Income Bracket of an Individual

Bracket (in
Tax Rate (per cent)
Below 5 Lakh Exempt
5- 7.5 Lakh 10
7.5- 10 Lakh 15
10-12.5 Lakh 20
12.5-15 Lakh 25
Above 15 Lakh 30

Tax Rates as per the Taxable Income Slab: Comparison with previous years

Taxable Income Slab (Rs.) Existing tax rates New tax rates
0-2.5 Lakh Exempt Exempt
2.5-5 Lakh 5% 5%
5-7.5 Lakh 20% 10%
7.5-10 Lakh 20% 15%
10-12.5 Lakh 30% 20%
12.5-15 Lakh 30% 25%
Above 15 Lakh 30% 30%
  • Deposit insurance for depositors enhanced fromRs 1 lakh to Rs 5 lakh.
  • Dividend Distribution Tax (DDT)removed making India a more attractive investment destination.
  • 25,000 crore estimated annual revenue forgone.
  • Start-ups with turnover up to Rs. 100 crore to enjoy 100% deduction for 3 consecutive assessment years out of 10 years.

Budget 2020 Impact On Agriculture:

  • FM stated that the government is determined to the goal of doubling the farmer’s income by the year 2022.
  • FM allotted budget of 2.83 lakh crore for agriculture and rural development.
  • Kisan Rail to be setup by Indian Railways through PPP
  • Krishi Udaan to be launched by Civil Aviation Ministry to transport agri-products to national as well as international destinations.
  • KUSUM scheme to be expanded to help 2 million farmers in setting up standalone solar pumps.
  • Agriculture credit target has been set at Rs 15 lakh crore.
  • A total of 11 crore farmers insured under Fasal Bima, says finance minister.
  • Under the Deendayal Antyodaya Scheme, fish farmer producer organisation to be set up.
  • Milk processing capacity to be expanded to 108 tonnes from 53.5 tonnes.

Budget 2020 Impact On Education

  • Under the Union Budget, Rs 99, 300 crore allocated for education sector in 2020-21 and Rs 3,000 crore for skill development.
  • New education policy will also be announced soon.
  • A degree-level full-fledged online education programme to be offered by institutes in top 100 in National Institutional Ranking Framework.
  • Indian Institute of Heritage and Culture to be established under Ministry of Culture.

Budget 2020 Impact On Health

  • 69,000 crores have been allotted to the health sector.
  • 4400 crores allocated for Clean Air
  • FM Proposes a public-private partnership (PPP) mode hospitals in 112 aspirational districts.Wellness water and sanitation & Healthcare Mission Indradhanush expanded to cover 12 diseases, Fit India Movement, Jal Jeevan Mission, Swachh Bharat Mission.
  • TB हारेगा, देश जीतेगाCampaign, Strengthen the campaign to end Tuberculosis by 2025. Jan Aushadi Kendra Scheme offering 2000 medicines, 300 surgical by 2024.
  • Rs 12,300 crore allocated to  Swachh Bharat Mission.
  • Rs 35, 600 crore for nutrition-related programmes for 2020-21.
  • Rs 3.6 lakh crore approved for Jal Jeevan Mission

Budget 2020 Impact On Infrastructure

  • 103 lakh crore National Infrastructure Pipeline projects earlier announced.
  • High-Speed Train Mumbai-Ahemadabad would be actively pursued, urge to State & UTs to replace conventional energy meters by prepaid smart meters in the next 3 years
  • 100 more airports will be developed under UDAN by 2024.
  • India will host G-20 presidency in the year 2022 and Rs 100 crore has been allocated for preparation.
  • 1.7 lakh crore proposed for transport infrastructure in 2020-21.

Budget 2020 Impact On Industry, Commerce and Investment

  • Propose to provide Rs 27,300 crores for development for industry and commerce for year 2020-21
  • Govt allows tech companies to set up Data Centre parks to provide internet to citizens. It allocates Rs 6,000 crore for Bharat Net
  • Policies will be launched soon for building Data Centre Parks.
  • A proposal to set up solar plants on the land owned by Railways is under consideration, says FM

Budget 2020 Impact On Tourism

  • Government has allocated Rs 2,500 crore for tourism for FY21.
  • Five archaeological sites will be developed as iconic sites with on-site museums -Rakhigarhi, Hastinapur, Shivsagar, Dholavira and Adichanallur. tribal museum will be set up in Ranchi, Jharkhand.
  • Rs 3,100 crore has been set aside for Culture Ministry.

Budget 2020 Impact On Environment & Climate Change

  • Allocation for this purpose to be 4400 crore for 2020-21.

Budget 2020 Impact On Indian Railways

  • Large solar power capacity to be set up alongside rail tracks, on land owned by railways.
  • Four station re-development projects and operation of 150 passenger trains through PPP.
  • More Tejas type trains to connect iconic tourist destinations.
  • High speed train between Mumbai and Ahmedabad to be actively pursued.
  • 148 km long Bengaluru Suburban transport project at a cost of Rs 18600 crore, to have fares on metro model. Central Government to provide 20% of equity and facilitate external assistance up to 60% of the project cost.

Budget 2020 Impact On Financial Sector

  • Reforms accomplished in PSBs :
    • 10 banks consolidated into 4.
    • Rs. 3,50,000 crore capital infused.
  • Governance reforms to be carried out to bring in transparency and greater professionalism in PSBs.
  • Few PSBs to be encouraged to approach the capital market to raise additional capital
  • Deposit Insurance and Credit Guarantee Corporation (DICGC) permitted to increase Deposit Insurance Coverage to Rs. 5 lakh from Rs.1 lakh per depositor.
  • Scheduled Commercial Bank’s health under monitoring through a robust mechanism, keeping depositors’ money safe.
  • Cooperative Banks to be strengthen by amending Banking Regulation Act for:
    • Increasing professionalism.
    • Enabling access to capital.
    • Improving governance and oversight for sound banking through the RBI.
  • NBFCs eligibility limit for debt recovery reduced from:
    • Rs. 500 crore to Rs 100 crore asset size.
    • Rs 1 crore to Rs 50 lakh loan size.
  • Private capital in Banking system:
    • Government to sell its balance holding in IDBI Bank to private, retail and institutional investors through the stock exchange.
  • Easier mobility in jobs:
    • Auto-enrolment in Universal Pension coverage.
    • Inter-operability mechanism to safeguard the accumulated corpus.
  • Pension Fund Regulatory Development Authority of India Act to 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.
  • Factor Regulation Act 2011 to be amended to:
    • Enable NBFCs to extend invoice financing to the MSMEs through TReDS
  • New scheme to provide subordinate debt for entrepreneurs of MSMEs by the banks
    • Would be counted as quasi-equity.
    • 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.
  • Window for MSME’s debt restructuring by RBI to be extended by one year till March 31, 2021.
    • More than five lakh MSMEs have already been benefitted.
  • An app-based invoice financing loans product for MSMEs to be launched.
    • To prevent the problem of delayed payments and consequential cash flows mismatches.
  • Export promotion of MSMEs:
    • For selected sector such as pharmaceuticals, auto components and others.
    • An Rs 1000 crore scheme anchored by EXIM Bank together with SIDBI.
    • Hand holding support for technology upgradations, R&D, business strategy etc.

Impact on Financial Market

  • Deepening Bond Market.
    • Certain specified categories of Government securities to be opened fully for non -resident investors also.
    • FPI limit in corporate bonds increased to 15% from 9% of its outstanding stock.
  • New legislation to be formulated for laying down a mechanism for netting of financial contracts.
    • Scope of credit default swaps to expand.
  • Debt Based Exchange Traded Fund expanded by a new Debt-ETF consisting primarily of Government Securities.
    • To give attractive access to retail investors, pension funds and long-term investors.
  • A Partial Credit Guarantee scheme for the NBFCs formulated post the Union budget 2019-20 to address their liquidity constraints.
    • New mechanism to be devised to further this.
    • Government support to securities so floated.

Budget 2020 Impact On: Women Empowerment and Backward Classes

  • Rs 85,000 crore allocated for SCs and OBCs in Budget for FY 2020-21
  • 28,600 crores allocated to programmes related to women
  • More than 6 lakh Anganwadi workers equipped with smartphones to update the nutritional status of 10 crore households Task Force appointed to mothers.
  • 53,700 crores allocated for  development of ST's
  • 9,500 crores allocated for Senior Citizens & Divyangs for 2020-21

Views and Opinions of Experts on Budget 2020:

Vetri Subramaniam, Group President and Head-Equity, UTI AMC: The slowdown in India has been evident since the end of 2018. The government has taken several measures to address this slowdown in recent months. Monetary policy has also turned accommodative and over time we expect growth to respond. For India growth is as much an element of macro-economic stability as is the fiscal deficit, current account deficit or inflation. In this context the budget as a policy tool provided an opportunity to deliver a counter cyclical fiscal impulse. This strategy is not without risk given the size of the government’s borrowing program and our historically weak track record of fiscal consolidation. The government has made the decision in today’s budget to stay on the path of fiscal consolidation. This choice, while prudent, raises downside risks to growth. On the positive side the government’s fiscal resolve creates headroom for the monetary authorities to remain supportive of growth.

Altaf Jiwani, CFO, Welspun India Ltd: The FM enumerated 16 initiatives to double income of the farmers which should have an impact on agri output. Ofcourse a few of these initiatives falls under states’ purview but these are a good starting point. Over a few years, we could see increase in the output of agri products including cotton which will help India retain its position as the world’s largest cotton producer. The initiatives on organic farming, allocation for national technical textile mission and skill India are a few other initiatives which should help the textile industry. The interdependence between agriculture and textile industry will see rub off effect on each other. Reduction in tax rates on income upto Rs 15 lakhs should induce consumption particularly by millennials.

Umesh Revankar, MD and CEO, Shriram Transport Finance: The budget presented by Ms. Nirmala Sitharaman is a pro-consumption budget. It strikes a balancing act between the urban and rural requirements. Government’s thrust on creating better infrastructure, building strategic highways like Chennai – Bangalore, Delhi - Mumbai will boost the sector and further create more demand and employment. Creating National logistics policy will be beneficial as it will bring in efficiency and reduce the turnaround time of the vehicle. Under the SARFAESI Act, the debt recovery has reduced from Rs.1 crore to Rs.50 lakh is one step ahead. We would still expect it to be on par with banks which currently stand at Rs.1 lakh. All in all, through this budget, the government is trying to simplify the existing complicated processes like GST, Income tax filing and bring in efficiency and growth.

Gautam Hari Singhania, Chairman and Managing Director, Raymond Ltd: In this budget, Government has provided stimulus to the economy in form of liquidity and consumption related interventions in the backdrop of visibly slowing global economic growth, including India.

It is very encouraging to note that the budget clearly laid out the government’s roadmap to position the economy for future sustainable growth—which will resonate well with both domestic and international stakeholders.

We welcome setting up of the National Technical Textiles Mission with an estimated outlay of Rs 1480 crore. While the overall outlay and incentives for Textile and Garmenting sector, which is one of the highest formal employment generation industry, could have been significantly more - it is a well balanced budget addressing many challenges and opportunities across sectors to give fillip to economic revival.

Navneet Munot, ED and CIO, SBI Mutual Fund: Overall, the government appears to have chosen to consolidate on the reforms of the past few years. The budget continued with the thrust on infrastructure, social welfare, improvement in ease of living, simplification on taxes and leveraging technology for better governance. 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.

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.

Pawan Goenka, MD at M&M: While we don't see any fiscal room for GST cuts in the auto sector, we hope that the price increase of that will happen with GST on BSVI If somehow would be neutralised, that would be beneficial to the industry.This whole business of being part of the global supply chain will have a huge impact to India. On electronics, I hope that the 12 percent tax on the import of electronic goods would also seek more initiatives to boost the manufacture of electronic good in India.

George Alexander Muthoot, MD, Muthoot Finance: Budget 2020 plays the balancing act very well. The enhancement of partial credit guarantee scheme for NBFCs is very encouraging for the sector as it addresses the liquidity issues.

The thrust to create huge employment opportunities can be seen in the budget. Increased focus on MSME sector through favorable policies, allocation of Rs 30,757 crore for J&K and Rs 5,958 crore for Ladakh will benefit small businesses. The extended tax benefit for affordable housing will benefit the lower and middle income groups in the country thereby providing much needed booster for affordable housing projects.

Satish Reddy, Chairman, Dr. Reddy’s Laboratories Ltd and President, Indian Pharmaceutical Alliance: The industry had high expectations of this budget as it was seen to be an opportunity to announce big, bold reforms given the state of the economy. On that count, there is a degree of disappointment in some quarters as expectations have not been met. However, I am happy to see that healthcare continues to be an integral part of the Government’s key priorities. The announcement on the expansion of the Ayushman Bharat program by setting up additional hospitals in tier 2 and 3 cities is a welcome move. Other measures in improving the healthcare infrastructure and capacity building in the sector are also commendable.

I would however have liked to see a significant financial incentive to boost exports and improve the competitiveness of the Pharma sector. I hope this will take shape with a new export incentive scheme. The overall thrust on ease of doing business, regulatory simplicity and policy stability should help the pharma industry scale new heights.

For a full read on Budget 2020 Please click on the following link: Budget 2020 and KEY HIGHLIGHTS OF UNION BUDGET 2020-21

Source: https://www.indiabudget.gov.in/index.php ; https://pib.gov.in/newsite/erelevent.aspx?mincode=15&eventt=8 ;
NDTV, Economic Times, LiveMint, Business Standard, Jagran Josh, India Today Business Line,Bloomberg Quint, Financial Express.

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