Historic Budget to satisfy everyone’s need but no body’s greed

Underlying message from the budget is that, It has abstained from window dressing with populist announcements, in spite of elections in five states, and has hit at the core of the economy where it hurts more.

FM has wonderfully touched the problematic area of the economy and has taken corrective measures having far reaching consequences.  Important area, such as rural connectivity, farmers woes, youth employment, catalyzing demands, government investments, electoral reforms, higher tax compliance, lowering of taxes for individuals, reducing corporate taxes of MSME’s with turnover up to 50 crores, tackling the issues for remonetisation and moving towards low transaction cost digital economy, large scale capitalization support for unorganized sector and taking steps towards ease of doing business, creating rural infrastructure, making available low cost housing and social security for the poor and left out segments of the society etc.

You name any segment of the country or any sector of the economy, Prime Minister Narendra Modiji’s government’s this budget has something for everyone. It’s like a magic box through which FM has been able to satisfy everyone’s need but not anyone’s greed.

Our sectoral analysis brings out clearly the above facts. We give below the highlights for some important sectoral announcements and the list is not exhaustive but is inclusive:

Rural Development and Connectivity

·         Rs 1,87,223 crore are allocated for rural programmes.

·         Rs. 19,000 crore announced for Pradhan Mantri Gram Sadak Yojana.

·         The country to achieve 100% rural electrification by March 2018.

·         The government targets to bring 1 crore households out of poverty by 2019.

·         Over Rs 3 lakh crore will be spent for rural India.

·         Budget for MGNREGA increased to Rs 48000 crores.

Tackling Farmer’s Woes

• A sum of Rs. 10 lakh crore is allocated as credit to farmers.
• 60 days interest waiver on loans.
• NABARD fund increased to Rs. 40,000 crore.
• Government will set up mini labs in Krishi Vigyan Kendras for soil testing.
• A dedicated micro irrigation fund set up with Rs 5,000 crore initial corpus.
• Irrigation corpus increased from Rs 20,000 crore to Rs 40,000 crore.
• Dairy processing infrastructure fund created with a corpus of Rs. 2000 crore.
• Issuance of soil cards has gained momentum.
• A model law on contract farming prepared by NITI Aayog and shared with the States for implementation.

Moving towards Skilling and Education for the Young India

• Introduction of a system of measuring annual learning outcomes and innovation fund for secondary education.
• 100 international skill centres to be established with courses in foreign languages
• National testing agency to be established for all entrance exams, freeing up CBSE, AICTE and other bodies
• Focus will be on 3,479 educationally-backward blocks.
• Special scheme for creating employment in leather/footwear sector.
• Propose to leverage information technology with launch of SWAYAM platform for virtual learning.
• Will take steps to create 5000 PG seats per annum.

Catalyzing demand through Government Investments

• Increased infrastructure spending to Rs 3,96,000 crores.

Maintaining Fiscal Prudence

• Economy has moved on a high growth path. India’s Current Account Deficit declined from about 1% of GDP last year to 0.3% of GDP in the first half of 2016-17.
• FDI grew 36% in H1 2016-17 over H1 2015-16, despite 5% reduction in global FDI inflows.
• Foreign exchange reserves have reached 361 billion US Dollars as on 20th January, 2017

Electoral Reforms

• The maximum amount of cash donation for a political party reduced to Rs. 2,000 from any one source.
• Political parties will be entitled to receive donations by cheque or digital mode from donors.
• An amendment is being proposed to the RBI Act to enable issuance of electoral bonds, with maturity date. A donor can purchase these bonds from banks or post offices through cheque or digital transactions. Only registered political parties can redeem these.
• Compulsory for all political parties to file Income Tax return by December end every year.

Tax Compliance

• After demonetization, deposit data to be analysed to increase tax net.
• No cash transactions above Rs 3 lakh.
• GST: preparedness of IT system on schedule, which will help in reduction of indirect tax to maximum of 18%.
• Time period of revising tax returns reduced to 12 months.
• Concessional withholding rate will be extended to 30 June 2020, rupee-denominated masala bonds to be included.
• MAT not to be abolished at present; to allow carry-forward for 15 years.
• People filing I-T returns for the first time will not come under any government scrutiny.

Lowering of Individual Tax

• Existing rate of tax for individuals between Rs.  2.5- Rs 5 lakh is reduced to 5% from 10%.
• All other categories of tax payers in subsequent brackets will get a benefit of Rs 12,500.
• Simple one page return for people with an annual income of Rs. 5 lakh other than business income.
• Ten % surcharge on individual income above Rs. 50 lakh and up to Rs 1 crore to make up for Rs 15,000 crore loss due to cut in personal I-T rate. 15 surcharge on individual income above Rs. 1 crore to remain.

Reduction in Corporate Taxes for MSME sector

• In order to make MSME companies more viable, there is a proposal to reduce tax for small companies with a turnover of up to Rs 50 crore to 25%. About 67 lakh companies fall in this category. Ninety-six % of companies to get this benefit.

Issues of Remonetisation and moving towards low transaction cost digital economy

• After the Indian government has started wheeling the remonetisation mechanism enduringly, banks and ATMs are witnessing a flow of currency. However, the authorities are urge the citizens to go towards digital economy and it was reflected on the budget this year, which was centralised at spending more, but via digital modes.
• Government to launch two new schemes to promote BHIM app, including cash back scheme for merchants.
• Incentives for digital payments.
• Lowering of costs for digital transactions.
• Aadhaar Pay to be launched for people who don’t have mobile phones.
• Panel on digital payments has recommending structural reforms.
• To create payment regulatory board at RBI.

Capitalization of Unorganized Sector

• Pradhan Mantri Mudra Yojana: Lending target almost doubled to Rs 2,44,000 crores.
• Fresh focus on Stand-up and start-up India schemes: over 16,000 new enterprises have been set up.

Ease of Doing Business

• Scope of domestic transfer pricing restricted to only if one of the entities involved in related    party transaction enjoys specified profit-linked deduction.
• Threshold limit for audit of business entities who opt for presumptive income scheme    increased from ` 1 crore to ` 2 crores.
• Similarly, the threshold for maintenance of books for individuals and HUF increased from    turnover of 10 lakhs to 25 lakhs or income from 1.2 lakhs to 2.5 lakhs.
• Foreign Portfolio Investor (FPI) Category I & II exempted from indirect transfer provision.
• Commission payable to individual insurance agents exempt from the requirement of TDS  subject to their filing a self-declaration that their income is below taxable limit.
• Under scheme for presumptive taxation for professionals with receipt up to Rs ` 50 lakhs p.a. advance tax can be paid in one installments instead of four
• Time period for revising a tax return is being reduced to 12 months from completion of  financial year, at par with the time period for filing of return.
• Time for completion of scrutiny assessments is being compressed further from 21 months to 18 months for Assessment Year 2018-19 and further to 12 months for Assessment Year 2019-20 and thereafter.

Low cost housing and boast to real state sector

• Affordable housing to be given infrastructure status.
• Changes in capital gains tax to support real estate.
• Lowering of rate of interest on EMI.
• Condition of presumptive rent if housing are kept vacant and not sold, this will put pressure for builders to sell flats.

Social Security for the poor and left out segments of the society

• Mahila Shakti Kendras with Rs 500 crore corpus.
• Stepped up allocation to Rs 1.84 trillion for various schemes for women and children.
• Action plan to eliminate leprosy by 2018, TB by 2025, reduce IMR to 29 in 2019.
• To create additional PG medical seats per annum.
• Two new AIIMS in Jharkhand and Gujarat
• Labour rights: Legislative reforms to simplify and amalgamate existing labour laws
• Allocation to Scheduled Casts increased to Rs 52,393 crore.
• Scheduled Tribes given Rs 31,920 crore.
• Minority affairs allocated Rs 4,195 crore.
• For senior citizens, Aadhaar-based smart cards with health details to be provided

All these provisions and announcement clearly points out that the budget is pro poor, pro farmers and rural India and benefits particularly those segments of the society who have been left out from the participation in the growth of the economy over the last several years.

Gopal Krishna Agrawal

National Spokesperson of BJP on Economic Affairs

gopal.agarwal@bjp.org

   

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