Union Budget 2016-17

Global economy is in a serious crisis. Financial markets have been battered but Indian economy has held its ground firmly and has hailed a bright spot. Finance Minister Arun Jaitley through the union budget 2016-17 focused efforts on rural development and fiscal discipline to transform India with a projected corpus of Rs.19.8 lakh cr.

 Budget 2016 had an enhanced focus on agrarian concerns and the rural sector which has been badly hit by the double whammy of twin droughts and unseasonal rains. Mr. Jaitley chose the path of fiscal discipline by sticking to the fiscal deficit targets of 3.9 percent for FY16 and 3.5 percent for the coming year.

Given the constraints arising from implementation of the Seventh Pay Commission Report and One Rank One Pension, the Budget was pretty much on expected lines with a fiscal target of 3.5 % of the GDP.

Finance Minister through “ Transform India “ bids to have a significant impact on economy and lives of people by enhancing expenditure in priority areas of farm and rural sector , social sector , infrastructure sector , employment generation and recapitalisation of banks by considering 9 pillars :

1)Agri/ Farm and welfare

2) Rural Focus

3) Social Healthcare

4) Education and Job creation

5) Investments to improve quality of Life

6) Infrastructure Focus

7) Ease of Business

8) Fiscal discipline

9) Tax Reforms

RURAL ATTENTION: 

This year’s budget is poised as a development and growth oriented one that seeks to benefit the farmers and the vulnerable:

·         With a vision to double farm income in the next 5 years, higher allocation has been provided for the flagship scheme of rural employment called MNREGA. Farm loan credit has been increased to Rs. 9 lakh crore for the year.

·         Mr. Jaitley announced that the government will soon embrace direct fertiliser subsidy transfer for the farmers concerned.

·         Mr. Jaitley added that nominal premium and highest ever compensation in case of crop loss under the Pradhan Mantri Fasal Bima Yojana will be set up by the government under NABARD.

·         In addition, close to Rs 87,000 crore has been allocated for rural development and around Rs 2.87 lakh crore has been proposed as grants for rural bodies in FY17. Rs. 35000 cr has been channelized for agriculture and Rs.60,000 crore has been set aside for ground water recharging.

·         A target of 100% rural electrification by May 2018 and universal coverage of cooking gas in the country was also announced. Giving a backing to AADHAR platform to ensure benefits reach the deserving people to prevent transmission loss was announced as well.

·         Mr. Jaitley also announced Health protection scheme up to1 lakh per family to protect against hospitalisation expenditure along with a dedicated long term Irrigation fund with initial corpus of about 20,000 cr.

INFRASTRUCTURAL PUSH:

·         A total of Rs 97,000 crore including Pradhan Mantri Gram Sadak Yojana has been earmarked for roads in FY17. An allocation of Rs 2.19 lakh crore for road and rail sector in the Union Budget for the next fiscal has been announced. The budget also proposed the development 160 non-functional airports across the country at a cost of Rs 50-100 crore each.

·         Initiatives will be introduced to reinvigorate infrastructure sector through Public-Private Partnership (PPP). 

THINGS THAT GOT COSTLIER:

·         Buying a car got costlier as Finance Minister Arun Jaitley has announced a 1% additional tax on cars costing above Rs.10 lakh. Small cars too have not been spared as a 1% infra cess has been levied on them.

·         Cigarette prices will also go up as the Finance Minister proposed to hike excise duty on tobacco (except bidis) by 10-15 percent.

·         A 1 percent excise duty has been levied on gold and diamond jewellery.

BANKING REFORMS:  

·         RBI Act will be amended to give statutory backing for monetary policy.

·         Bank recapitalisation figure was scheduled as Rs 25,000 crore for FY17, and a greater push for infra spending to boost the investment cycle was also announced. 

·         Listing of general insurance companies and bank consolidation target was also proposed.                             

 

    

 TAX CHANGES:   

·         Service Tax has been raised to 15 % from 14.5 % while the tax slabs remain unchanged.      Moreover, the proposal to tax dividends above Rs 10 lakh in the hands of the investor and increase securities transaction tax for options trades have come as dampeners.

·         A slight relief was the absence of the dreaded increase in tenure for long term capital gains tax. 

EDUCATION/ENTREPRENEURIAL REFORMS:

·         National SC/ST hub to support SC/ST entrepreneurs was proposed.

·         The Finance Minister also announced that a higher education Financing Agency will be set up, with a fund of Rs 1000 crore.

·         To boost the start-up culture, the companies will get 100 per cent tax exemption for three years except MAT which will apply from April 2016-2019 for creation of jobs.

OTHER REFORMS:

·         For those with annual income below Rs 5 lakh, the rebate under section 87A has been increased to Rs 5000 from Rs 2000. Also, the exemption limit for payment towards rent has been raised to Rs 60,000 from Rs 24,000. But the catch here is that only those who do not get house rent allowance and do not own a house will be eligible for the higher limit.

·         Government will pay EPF contribution of 8.33% for all new employees for 1st three years.

                                     

FINAL TAKE:

The budget was considered by many experts as being pro-poor and focusing extensively on the farming sector. It seems that the government wanted to spread the benefits of growth more widely among India’s 1.3 billion people, but would stick to the existing fiscal deficit target. With an eye on supporting the small tax-payer and the small investor, the Minister announced a slew of schemes, and income tax exemption. Salaried class would have reason to feel disappointed with the Budget, given that there was barely anything in it for them. The market was hoping that the Budget would allocate more than the Rs 25,000 crore marked for recapitalisation of banks, in FY17. But the Finance Minister chose to maintain a status quo while maintaining that the government was committed to easing the stress in the banking system. The higher allocation for the rural sector and farming was required considering that rural recovery is key to overall GDP growth. Yet, it remains to be seen whether these measures in themselves can help revive rural demand anytime soon.