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 the government’s efforts on rural development and fiscal discipline to transform India with a projected corpus if 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. 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 through enhancing expenditure in priority areas of farm and rural sector , social sector, infrastructure sector, employment generation and recapitalisation of banks

RURAL ATTENTION: 

·         Higher allocation for MNREGA. Of the amount Rs 87,000 crore has been announced for rural development 

·         Rs 2.87 lakh crore has been proposed as grants for rural bodies in FY17.

·         Rs.60,000 crore has been set aside for ground water recharging.

·         Target of 100% rural electrification by May 2018 has been identified.

·         Statutory backing to AADHAR platform to ensure benefits reach the deserving people to prevent transmission loss was also announced.

·         Universal coverage of cooking gas in the country has been proposed.

AGRICULTURE PUSH:

·         Direct fertiliser subsidy was announced transfer for the farmers concerned.

·         Rs. 35000 cr. has been allocated for agriculture.

·         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.

·         Farm loan credit has been increased to Rs. 9 lakh crore for the year.

·         Dedicated long term Irrigation fund with initial corpus of about 20,000 cr was also proposed.

BANKING REFORMS:  

·         RBI Act has been proposed to 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 announced as well. 

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

TAX REGIME:

·         Excise duty on tobacco products has been increased to 15%. But excise duty on bidis remains constant.

·         Infrastructure and agriculture cess will be levied. 0.5 per cent Krishi Kalyan Cess will be levied on all services. Pollution cess of 1% on small petrol, LPG and CNG cars, 2.5 % on diesel cars of certain specifications and 4% on higher-end (luxury cars and SUVs) is also proposed to be levied.

·         Cars costing more than 10lakhs will become more expensive as 1% service charge will be imposed.

·         Additional Tax of 10% on Dividends in excess of Rs. 10 lakh p.a. was proposed.

·         Excise duty of 1 % levied on jewellery excluding silver was also announced.

·         Service tax has been increased from 14.5% to 15%.

INFRASTRUCTURE:

·         Government's total investment in infrastructure for 2016-17 will be 2,21,246 crore.

·         Revival of underserved airports was announced. Centre in conjunction with States will revive small airports to improve regional connectivity.

·         Rs. 55,000 crore has been allocated for the development of roads and highways. Till now the government has committed Rs 97000 crore for road construction, including PMGSY (PRADHAN MANTRI GRAM SADAK YOJNA).

·         The government will take steps to drive up private sector's capex in infrastructure. PPP model will be used to provide support to the companies undertaking infrastructure projects.

EDUCATION & SKILLS:

·         The government will spend Rs.500 crore to promote entrepreneurship among SC/ST.

·         10 public and 10 private educational institutions were proposed to be made world-class.

·         Skill India will get a boost as 1500 multi-skill development centres will be setup for which the government will incur expenditure of Rs. 1700 crore

·         62 new navodaya vidyalayas were proposed to be setup to provide quality education

·         A scheme which will cover 6 crore additional rural households to ensure digital literacy was also announced.

·         A higher education Financing Agency was proposed to be set up, with a fund of Rs 1000 crore.

·         To make 'Start up India' a reality, 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 the key to overall GDP growth. Yet, it remains to be seen whether these measures in themselves can help revive rural demand anytime soon.


- Mukund Kakkar and Sarthak Verma