Small Reliefs To Middle Class But With Heavy Taxation : Retains fiscal deficit target; hikes infra spending.
New Delhi : In a course correction – possibly to dispel the notion that it is a ‘‘suit-boot ki sarkar” — Finance Minister Arun Jaitley has brought ‘Bharat’ back on the Modi table by promising farmers that he will double their income by 2022.
A sum of Rs.20,000 crores has been allocated, therefore, under the Pradhan Mantri Krishi Sinchai Yojana that would target the creation of irrigation potential estimated at 28 lakh hectares by expediting schemes that have been languishing for years.
The government will also spend more on rural infrastructure and provide road connectivity and electricity to all villages in the next couple of years. This envisages a huge spending to address the agrarian distress. Such was the rural thrust of the Budget that there was no mention of a hike in the Defence outlay. At the same time, in a politically loaded gesture, Jaitley announced a 3 per cent hike in surcharge on super-rich.
The Budget has also brought in a new 0.5 per cent ‘Krishi Kalyan’ cess, which will be levied on all services and help fund agriculture reforms. The cess will add 50 paise to every Rs.100 one spends on food to mobile bills. In other words, urban India will be paying for the thrust to Bharat’s infrastructure.
The rural sector would also get a big push as the government implements the recommendation of the 14th state Finance Commission for enhancing the grant-in-ad to gram panchayats to Rs.2 lakh crores. The allocation for the rural employment guarantee scheme MGNERGA at Rs.38500 crore is the highest in the last few years.
Jaitley, in a way, has put his best foot forward and come up with a combination of fiscal prudence and enhanced infrastructure spending. Betting on the need for stability and optimality, he retained the fiscal deficit target of 3.9 for 2015-16 and3.5 for 2016-17. ‘‘I have weighed the policy options and decided that prudence lies in adhering to the fiscal targets. While doing so, I have ensured that the development agenda has not been compromised,” he told reporters at a post-budget media briefing.
On infrastructure spending, the finance minister asserted that along with the allocation for the railways the total outlay for the entire transport sector is Rs.2.21 lakh crores which is the highest so far.
Tax relief for people having annual income of up to Rs. 5 lakh
But this composite approach is aimed at taking forward economic reforms and giving a boost to overall development.
Jaitley, however, did not miss the opportunity of taking pot shots at the opposition. In his speech, he asserted: “Our initiatives in the last 21 months have not only placed the economy on a faster growth trajectory but have bridged the trust deficit created by the previous Government. We had to work in an unsupportive global environment, adverse weather conditions and an obstructive political atmosphere.”
But then he also did not mention a word about the pending GST bill in his speech and later expressed the hope that the Congress party would help and cooperate in the passage of this key reform.
His recurrent theme in the budget was Transform India and this hinged on a nine-point charter and he concluded his speech with a resolve: “Champions are made from something they have deep inside of them — a desire, a dream, a vision”. We have a desire to provide socio-economic security to every Indian, especially the farmers, the poor and the vulnerable; we have a dream to see a more prosperous India; and a vision to ”Transform India”.
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In a shock for the fixed salaried person, who often dips into the EPF to meet medical emergencies and other dire needs, withdrawals from both the provident fund and the pension fund will be now partially taxable. According to one estimate, this move will disappoint nearly six crore people.
Jaitley also resorted to some gimmickry: he has given small doses of concessions – such as a marginal tax relief of up to Rs 6,600 to small tax payers — that are overshadowed by a heavy dose of indirect taxes totaling up to Rs 20,760 crore — the highest hike being excise duty of 10-15% on tobacco products, except bidis.
The direct tax reliefs total up to just Rs 1,060 crore, while a new 0.5% farm cess, which is to be levied on all services, and the customs duty hike across the board will have cascading effect on the prices of all commodities and services. This is Jaitley’s way of boosting the sluggish economy.
Jaitley called his budget pro-poor, pro-rural and cited the relief to small middle class taxpayers, but experts said all such small reliefs will be wiped out by inflation and ought to come from indirect taxes.
Jaitley made no changes in the personal or corporate income- tax slabs but made costlier several items, including electricity, jewellery, readymade garments, mineral water and aerated drinks, tobacco and cigarettes by raising duties.
Against expectations of incentives for industry hit by global slowdown and shrinking exports, the Budget did not offer anything major.
Asked about comments that the Budget was left-of-centre, Jaitley said, “It is neither left nor right but deals with the reality of Indian economy. It addresses sectors which need highest priority and rural areas need most attention.”
The Transform India mantra
(i) Agriculture and Farmers” Welfare: with focus on doubling farmers” income in five years;
(ii) Rural Sector: with emphasis on rural employment and infrastructure;
(iii) Social Sector including Healthcare: to cover all under welfare and health services;
(iv) Education, Skills and Job Creation: to make India a knowledge based and productive society;
(v) Infrastructure and Investment: to enhance efficiency and quality of life;
(vi) Financial Sector Reforms: to bring transparency and stability;
(vii) Governance and Ease of Doing Business: to enable the people to realise their full potential;
(viii) Fiscal Discipline: prudent management of Government finances and delivery of benefits to the needy; and
(ix) Tax Reforms: to reduce compliance burden with faith in the citizenry
