“Is it a mixed budget” or “A realistic one”
Presenting the Budget
on Monday Finance Minister Arun Jaitley said the Indian economy has weathered
the serious global crisis. Arun Jailtey said despite inheriting a weak economy,
the government has turned the adversities into opportunities.
The
current account deficit has declined to $14.4 bn dollars, projected 1.4% of
GDP.
The growth of GDP has
accelerated and inflation has decelerated, GDP growth accelerated to
7.4%.Current government have bridged the
trust deficit created by the previous government, forex reserves are at the
highest level,CPI inflation has come down to 5.4% under our government, despite
two poor monsoons .Govt to provide additional resource to rural and
vulnerable areas.
Increasing outlay on
social sector programmes, 3 schemes to be focus: Crop Insurance, health
insurance scheme for 1/3rd of India and BPL families to be provided with
cooking gas connection helped by govt.
7th Pay Commission
and OROP to put burden on finances FY16-17 and FY18 to be challenging, Will
provide for PSU bank recapitalisation in this fiscal.Govt to focus on passing
GST and Bankruptcy laws. Agriculture
and farmers' welfare: Need to think beyond food security to income security,
will double income of farmers by 2022. Rs 35, 984 crore allocation.
AGRICULTURE SECTOR HIGHLIGHTS:
- Total allocation for agriculture and farmer welfare at Rs 35984 crores.
- 28.5 lakh hectares of land will be brought under irrigation.
- 5 lakh acres to be brought under organic farming over a three year period.
- Rs 60,000 crore for recharging of ground water recharging as there is urgent need to focus on drought hit areas cluster development for water conservation.
- Dedicated irrigation fund in NABARD of Rs.20.000 cr.
- Nominal premium and highest ever compensation in case of crop loss under the PM Fasal Bima Yojna.
IMPACT: The Union
budget presented by the government was mainly aimed at reviving the rural
consumption by reviving the agricultural sector by introducing policies and
funding to various NBFCs and government corporations to provide farmers with
the much needed liquidity to ensure
income security apart from food
security.
RURAL SECTOR HIGHLIGHTS:
- · RS 20000 crore budget allocation to NABARD for well fare of farmers and farming related policies.
- · RS 8500 crore allocated for Rural area electricity target is to give electricity to 100% rural area by 01 May 2018.
- · RS 9000 cr allocation for Swacchh Bharat Abhiyan.
- · RS 87765 cr for overall rural development allocated.
- · More LPG connections for Women in Rural Areas.
- · Rs 17,000 crore will be allocated to the Accelerated Irrigation Benefits Programme (AIBP), the FM says. "Over the past five years, we propose to spend Rs 86,500 crore over five years on irrigation."
- · 5 lakh crore acres of farms will be brought under organic farming. The FM says this is the highest ever allocation ever made to the scheme.
IMPACT: The
rural consumption has decreased in the current fiscal mainly due to decrease in
farming and agricultural income due to unwanted agricultural and rural
practices which was mainly accompanied by poor weather and less than expected
monsoon for couple of years. This will be boosted by government by providing
allocations for irrigation project and electricity production. This will get a
boost by government promise of allocating RS 87765 crore.
SOCIAL SECTOR HIGHLIGHTS
- · A mission to provide LPG gas connection to women household members at a cost of Rs 2,000 crore.
- · National Skill Development Mission has imparted training to 76 lakh youth. 1500 multi skill training institutes will be set up.
- · The total outlay for roads will be at Rs 97,000 crore. Along with railways, the total spend in FY17 will be at Rs 2.18 lakh crore.
- · To allocate 17K crore on employment and skill development.
- · 150 mutli skill development centres to be developed.
IMPACT: Government is focussing on developing
skills and empower the rural population by providing skill based education to
all, especially to uplift the social status of women by developing national
centres and skill based institution to impart skill based development for all
.This will create a self sufficient social sector that government think is
important for social development and harmony.
INFRASTRUCTURE SECTOR
HIGHLIGHTS:
- · To allot 55000 cr for roads and infrastructure.
- The total outlay for roads will be at Rs 97,000 crore. Along with railways, the total spend in FY17 will be at Rs 2.18 lakh crore.
- Nearly 85 % road projects back on track.
- 10000 Km of National Highways on started in FY 2016- 2017.
- "Pace of completion of roads will rise to 10000 km in FY17.
IMPACT: Although
government is balancing its budget due to various constraints and as the much
needed reform in infrastructure were awaited, government assured its commitment
to revive the infrastructure segment by providing liquidity and making sure
that projects are completed in time so as to speed up the development process.
For this government will spend around 2.18 lakh crore to keep the cash crunch
in infrastructure sector growing in India.
HEALTHCARE SECTOR HIGHLIGHTS:
- · 2.2 lakh renal patients added every year in India. Basic dialysis equipment gets some relief.
- · A new health protection scheme for health covers upto 1 lakh per family.
- · National Dialysis Service Program with funds through PPP mode to provide dialysis at all district hospitals.
- · Senior citizens will get additional healthcare cover of Rs 30,000 under the new scheme.
- · PM Jan Aushadhi Yojana to be strengthened.
- · 3000 stores for Generic drugs will be opened in FY 2017- FM.
IMPACT: As
always government has focussed in healthcare sector and announced various
schemes for family coverup and provide additional healthcare to senior citizen.
Moreover new generic drug stored will be opened to provide scarce
medicines.Dialysis equipment to become cheap as dialysis patients increasing in
government notice.
EDUCATION SECTOR:
- · Scheme to get Rs.500 crore for promoting entrepreneurship among SC/ST.
- · 10 public and 10 private educational institutions to be made world-class.
- · Digital repository for all school leaving certificates and diplomas. Rs. 1,000 crore for higher education financing.
- · Rs. 1,700 crore for 1500 multi-skill development centres.
- · 62 new navodaya vidyalayas to provide quality education.
- · Digital literacy scheme to be launched to cover 6 crore additional rural households.
- · Entrepreneurship training to be provided across schools, colleges and massive online courses.
- · Objective to skill 1 crore youth in the next 3 years under the PM Kaushal Vikas Yojna-FM Jaitley.
- · National Skill Development Mission has imparted training to 76 lakh youth. 1500 Multi-skill training institutes to be set up.
IMPACT: Government
has long commitment to deliver for the education sector especially for the underprivileged.
Government will employ funds to promote entrepreneurship among SC/ST. New
private and public educational institution to be set up. More emphasis to be
given on skilled training and for this multi training institutes to be set up.
Government will also promote online courses and training in schools and
colleges.
PERSONAL FINANCE:
- No changes have been made to existing income tax
slabs.
- Rs 1,000 crore allocated for new EPF (Employees'
Provident Fund) scheme.
- Government. will pay EPF contribution of 8.33%
for all new employees for first three years.
- Deduction for rent paid will be raised from Rs
20,000 to Rs 60,000 to benefit those living in rented houses.
- Additional exemption of Rs. 50,000 for housing
loans up to Rs. 35 lakh, provided cost of house is not above Rs. 50 lakh..
- Service tax exempted for housing construction of
houses less than 60 sq. Metre.
- 15 per cent surcharge on income above Rs. 1
crore.
IMPACT: People were
expecting a raise in income tax slabs which remained same, while raise in other
provisions such as deduction in rent paid and additional exemption of Rs 50,000
for housing loans is a welcome step which would help people save money and can
encourage buying of houses as well.
ENERGY SECTOR:
- Rs. 3000 crore earmarked for nuclear power generation.
- Govt drawing comprehensive plan to be implemented in next 15-20 years for exploiting nuclear energy.
- Govt to provide incentive for deepwater gas exploration.
- Deepwater gas new discovery to get calibrated market..freedom, pre-determined ceiling price based on landed price of alternate fuels.
IMPACT:
A good step keeping in mind the
long term energy consumption probabilities of India as Nuclear energy and
deepwater gas exploration can help generating future energy needs.
FINANCIAL SECTOR HIGHLIGHTS
- · Revamping Banking Sector bank, Proposes 25000 Cr towards recapitalisation of PSB. Expected was more than 40000 Cr, negative for PSB.
- · 100 percent FDI for food processing industry will be allowed. The government will tweak FDI norms for stock exchanges, pension, insurance, asset reconstruction. "Details are in the Budget document," the FM says.
- · The Bankruptcy Code Bill will be introduced in Parliament in FY17.
- · To allow 100% FDI in Asset recast companies.
- · The FM proposes to tweak the SARFAESI Act, which deals with liquidation and recovery processes. A proposal for the SEBI Act is also made.
- · Banking Board Bureau be operational by 2017.
- · To cut stake in IDBI Below 50 %.
- · To stick to the fiscal deficit of 3.9 % in FY16 GDP. To stick to the fiscal deficit of 3.5 % in FY17.
- · Total expenditure at 19.7 Lakh Crores in FY17.
- · Revenue Deficit Target of FY 16 at 2.5 %.
- · Overall, the government has increased its plan expenditure by 15.3 percent to Rs 5.5 lakh crore. Non plan expenditure at Rs 14.28 lakh crore.
·
The Modi
government's war on Soviet-era central planning methods. Following the
abolition of the Planning Commission, the government will now do away with the
distinction between plan and non-plan expenditure from FY18.
·
"The
AAM AADMI won't be pleased at all."
·
A Krishi
Kalyan cess of 0.5 percent on all services, effective June 1. - Infra cess of 1
percent on small petrol, LPG and CNG, 2 percent on other vehicles; 4 percent on
big vehicles.
·
STT on
options to be raised to 0.05 percent from 0.017 percent.
IMPACT: Major
step was needed for the recapitalisation of PSB’s which government did it
partly with allocation 25k Crores for the same against the expectation of 40 k
Crores. Market plunged with this negative news. Although maintaining deficit
targets was a welcome step of the finance minister.
TAXATION HIGHLIGHTS:
- Relief to those in rented houses: deduction raised from Rs 24,000 to Rs 60,000 under Section 88G
- Ceiling of tax rebate for taxpayers with up to Rs 5 lakh annual income will be raised from Rs 2,000 to Rs 5000
- Broad income tax slabs remain at the same levels as last year.
- Capital gains not to be taxed on investments in regulated fund of funds for start-ups. LTCG period for unlisted cos reduced to 2 years.
- For first time homebuyers, FM proposes an extra Rs 50,000 tax deduction on interest paid as far as loan amount is less than Rs 35 lakh and house value is less than Rs 50 lakh."
- Propose 100 percent deduction to undertakings for construction of affordable housing
- Excise duty on Tobacco products 10- 15 %.
- Clean Energy cess on Coal Doubled to Rs400 / tonne
- 4 % Infra Cess on SUVs.
- 7.5 % Surcharge on undisclosed income.
- The FM attempts to bury the retro tax ghost. Announces a fresh dispute resolution scheme. Has also proposed a one-time scheme that will waive off interest and penalty, provided companies withdraw cases.
- To Abolish 13 Cesses by the Ministers.
- Ease of doing business: FM says government will reduce multiplicity of taxes and cascading -- 13 taxes with collection less than Rs 50 cr a year abolished.
- To hike STT on Option Contracts to 0.05 %.
- Withdrawal from NPS up to 40% tax Exempt. Infra cess of 2 % on Diesel Cars.
- Infrastructure and agriculture cess to be levied.
- Excise duty raised from 10 to 15 per cent on tobacco products other than beedis
- 1 per cent service charge on purchase of luxury cars over Rs. 10 lakh and in-cash purchase of goods and services over Rs. 2 lakh.
- SUVs, Luxury cars to be more expensive. 4% high capacity tax for SUVs.
- Companies with revenue less than Rs 5 crore to be taxed at 29% plus surcharge
- Limited tax compliance window from Jun 1 - Sep 30 for declaring undisclosed income at 45% incl. surcharge and penalties
- Excise 1 per cent imposed on articles of jewellery, excluding silver.
- Pollution cess of 1 per cent on small petrol, LPG and CNG cars; 2.5 per cent on diesel cars of certain specifications; 4 per cent on higher-end models.
- Dividend in excess of Rs. 10 lakh per annum to be taxed at additional 10 per cent.
·
IMPACT:Six key effects on the
common man's wallet:
FM Arun Jaitley said that
the tax exemption for house rent allowance will be raised to Rs 60,000 from the
current Rs 24,000-level.
“The move is likely to bring in relief to the common man”
Service
tax
The government, in the
Union Budget for 2016-17, decided to keep service tax rates unchanged at 14.5% (14% service tax + 0.5% Swach Bharat Cess)
“Certain announcements also ensured there were some ‘taxing times’ ahead
for the common man.”
Buying
a car costlier now
An additional 1% tax on
luxury cars above Rs 10 lakh was imposed by the Centre in the Union Budget
today.
The Centre also imposed an additional infrastructure cess of 1% on small petrol
cars and a 2.5% cess on diesel cars.
Krishi
Kalyan Tax
Jaitley announced a 5% tax
on all taxable services under the Krishi Kalyan tax in a bid to benefit the
farming community.
Cigarettes to cost more
Excise duties on various
tobacco products other than beedi have been raised by about 10 to 15%.
CONCLUSION:
Arun Jaitley pulled of a revenant act
with stressing majorly on social sector considering the areas where new growth
opportunities can be made. Also acting as a doctor for the banking sector by
just missing out of reviving it completely but yes opening a pathway for the
recovery and being open for any further help if needed for the ailing sector
due to NPA’s.
It pumped money into the infrastructure
sector in a bid to keep the engines of growth well oiled, while keeping the
budget math balanced to meet the 3.5 % fiscal deficit target. This was
impressive.
It was a budget which covered every
sector to play safe while also braved to add cess charges to number of
industries like automobile and service .
All in all it remained a realistic
budget taking the realistic view if the economy under global market pressures.
