New Delhi: With an eye on the Assembly elections looming in several states in the coming months, finance minister Arun Jaitley unveiled a pro-poor and pro-farmer Union Budget here on Monday to boost the ruling BJP’s prospects, specially after the drubbing it got in Delhi and Bihar over the past year. The finance minister also tried to give a extra push to growth through increased investment in the infra sector, pegged at Rs 2,21,246 crores, liberalising foreign direct investment and trying to bury the ghost of retrospective taxation by offering not to charge penalty and interest on Vodafone and Cairn if they withdrew from international arbitration proceedings against the government.
Read: Budget 2016: Arun Jaitley gives PF shocker
Mr Jaitley stuck to the fiscal deficit target for FY17 at 3.5 per cent to bring credibility to the country’s finances and continued macro stability. He choose not to push growth by increasing borrowing as recommended by sections of industry. The Economic Survey had already indicated that growth in FY17 will be more or less as in the current fiscal. Sticking to the fiscal deficit target will put pressure on RBI governor Raghuram Rajan to cut interest rates to give the economy a further boost.
While industry circles are hopeful that the thrust on rural sector spending in particular will boost growth, it also has concerns over higher taxation on the super-rich by raising the surcharge on them by three per cent, calling it the “Robin Hood” effect.
After the failure of the black money compliance scheme last year for those who have assets abroad, Mr Jaitley unveiled a new scheme for those who have undisclosed income within the country, albeit with a lower rate of taxation, to make it successful this time. But it would be interesting to see how the Supreme Court will react to this as it has by and large been against amnesty schemes.
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There were no major measures for the middle class reeling under slow economy growth and rising expenditure. Trying to maintain a tight fiscal deficit at a time of falling tax revenue and due to implementation of the Seventh Pay Commission meant the finance minister had to look at alternative sources of revenue generation. The axe fell on the middle class, who now face an increase in service tax. Bringing PF and EPF under the tax net and no increase in the income-tax exemption limit has added to their woes.
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Mr Jaitley announced plans for the strategic sale of PSUs. Increased spending on the social sector left scant cash over to recapitalise state banks. Seen by economists as a “Budget for Bharat”, Mr Jaitley’s exercise marked a strategic shift by addressing rural distress, and going for an overdrive to woo the rural population by promising to double farm incomes in six years, raising allocations for the agri-sector to Rs 44,485 crores, unveiling aggressive irrigation plans, giving a whopping Rs 38,500 crores for MGNREGA in 2016-17 and a new health insurance plan for the poor. Mr Jaitley announced a grant of Rs 2.87 lakh crores for gram panchayats and municipalities, vowed to bring more BPL families under LPG coverage and total electrification of villages in next few years. He announced initiatives for SC and ST businessmen and tax exemptions to start-ups as well.
Read: Budget 2016: Arun Jaitley gives PF shocker
Participating in the post-Budget “Hackathon” on Monday, Mr Jaitley reiterated that the government would reach out to the Congress in the current session of Parliament to resolve the deadlock over the GST Bill. “As far as GST is concerned, every political party claims to be in favour of it. The Congress Party had put some conditions. I think one condition still remains there. I will try to talk to them in the remaining part of the Budget Session of Parliament, and try to move ahead with the GST Bill,” he said.
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The finance minister said the GST Bill was the “need of the hour” and had the capability to strengthen the Indian economy. “It is simple, will help in expansion of revenue, states will get benefit out of it, business will have ease and it will facilitate seamless transfer of goods and services... GST will help to make the whole country one single market, it means one-sixth of the world market is one market. You won’t get a bigger market than this elsewhere”, Mr Jaitley added.
