Five Union Budget 2019 Announcements Markets Did Not See Coming

Finance Minister Nirmala Sitharaman presented the Union Budget 2019 with an economic agenda to push the economy towards the US $5 trillion mark in the coming years. Interestingly, in an over

two-hour speech, Nirmala Sitharaman made certain proposals that raised quite a few eyebrows. Here’s a look at five such decisions that the markets were not expecting:

Proposal to hike minimum public shareholding in listed firms

Finance Minister Nirmala Sitharaman proposed to increase minimum public shareholding for listed companies from the existing 25 percent to 35 percent. This means promoters can’t hold more than 65 percent in listed companies. However, it is still a proposal as Sitharaman said that she made the suggestion to market regulator Sebi, which will consider it in the coming days.

If the move is approved by Sebi, it will be positive for investors but a mixed bag for Indian companies. An estimated 250 plus companies with a 65 percent promoter shareholding will be impacted. Stocks like TCS, Wipro, Interglobe aviation, Bandhan Bank were under pressure as all of them have over 70 percent promoter shareholding.

Hike in surcharge on super-rich individuals

Union Budget 2019 announced that the surcharge applicable on income between Rs 2 crore and Rs 5 crore will be increased by 3 percentage points to 18 percent. The final tax rate for this income tax bracket will now be 36.816 percent.

Those earning Rs 5 crore and above will have to pay a surcharge of 22 percentage points; a rise of 7 percentage points over the current surcharge of 15 percent. The final tax rate for this section will now be 38.064 percent.

Interchangeability of Aadhaar and PAN card

Sitharaman also announced the interchangeability of PAN and Aadhaar cards. There are reportedly 120 crore Aadhaar holders in the country. The move will help people to file income tax returns (ITR) without PAN card by quoting just their Aadhaar number.

Proposal to further ease FDI norms in aviation

Union Budget 2019 announced that it will work towards further liberalising the Foreign Direct Investment (FDI) norms in aviation. Last year, the cabinet had eased the FDI norms for the sector by allowing 100 percent FDI into domestic carriers under automatic route. It had also approved investment up to 49 percent in Air India under approval route.

Now it remains to be seen how the FDI norms will be liberalized further as the government is expected to float the preliminary information memorandum for divestment of stake in Air India.

Local sourcing norms to be eased for single-brand retail FDI

Sitharaman announced that local sourcing in Foreign Direct Investment (FDI) in single-brand retail will be eased. This will be a good news for single-brand retailers such as Ikea and Apple. More brands may join the queue, if the relaxations are significant. Currently, the FDI policy allows 100% foreign investment in single-brand retail under the automatic route but requires an investor to source 30% of the goods from India.