The Union Finance Minister Arun Jaitley presented his third budget along with the Finance Bill today. With billions of rupees allocated for farmers and the poor, the 2016-17 budget aims to boost the rural economy.
Key achievements of the Indian economy in 2015-16:
The Indian economy’s most notable achievement in 2015-16 is that despite the global economic crisis, which immensely slowed down global growth, the Indian economy has accelerated from 6.3 to 7.6% in 2015-16. The CPI inflation has reduced from 9.4% to 5.4% during FY15. Hence, the 2016-17 Budget has been formulated to sustain the growth trajectory.
Mission ‘Transform India’
Finance Minister Jaitley declared that the NDA government’s agenda is to ‘Transform India’ by increasing expenditure in the farm and rural sectors, the social sector, the infrastructure sector and infuse funds into PSBs in order to alleviate the pressure due to mounting NPAs. He also promised to effect several including legislative, transportation, banking and financial reforms.
The Transform India mission includes the following nine categories:
1. AGRICULTURE & FARMER’S WELFARE
a) Total allocation for agriculture and farmers’ welfare is Rs.35,984 crore. The government will strive to double the income of farmers by 2022.
b) A total of 28.5 lakh hectares will be brought under irrigation under the ‘Pradhan Mantri Krishi Sinchai Yojana’
c) Implementation of 89 irrigation projects under AIBP will be fast-tracked and a dedicated Long Term Irrigation Fund will be created in NABARD.
d) Rs.60,000 crore for groundwater recharging to enable water conservation in drought-hit areas.
e) Implementation of ‘Parmparagat Krishi Vikas Yojana’ and ‘Organic Value Chain Development in North-East Region’ in order to promote organic farming.
f) A sum of Rs.19,000 crore will be allocated under the Pradhan Mantri Gram Sadak Yojana to connect the remaining 65,000 eligible habitations by laying 2.23 lakh kms of roads by 2019.
g) To reduce the burden of loan repayment on farmers; a provision of Rs.15,000 crore towards interest subvention.
h) Under the Pradhan Mantri Fasal Bima Yojana Rs.5,500 crore has been allocated.
2. RURAL SECTOR:
a) For overall rural development Rs.87,765 crore has been allocated.
b) As per the recommendations of the 14th Finance Commission, Rs.2.87 lakh crore will be given to Gram Panchayats and municipalities.
c) Under the Shyama Prasad Mukherjee Rurban Mission, 300 Rurban clusters will be developed.
d) A new Digital Literacy Mission Scheme for rural India will cover around 6 crore additional households within the next 3 years.
e) New scheme called Rashtriya Gram Swaraj Abhiyan has been proposed with an allocation of Rs.655 crore to enable Panchayats to gain governance abilities.
3. SOCIAL SECTOR:
a) Allocation for social sector, including education and health care is Rs.1,51,581 crore.
b) Rs.2,000 crore allocated for initial cost of providing LPG connections to BPL families.
c) New health protection scheme will provide health cover up to Rs.1 lakh per family.
d) A total of 3,000 stores for generic drugs will be established under the Prime Minister’s Jan Aushadhi Yojana.
e) Stand Up India Scheme to benefit at least 2.5 lakh entrepreneurs.
f) For the Swachch Bharaat Abhiyan, Rs.9000 crore has been provided.
g) A sum of Rs.38,500 crore allocated for MGNREGS.
4. EDUCATION AND JOB CREATION:
a) A total of 62 Navodaya Vidyalayas will be opened.
b) Higher Education Financing Agency to be established with an initial capital base of Rs.1000 crore.
c) Digital Depository for School Leaving Certificates, College Degrees, Academic Awards and Mark sheets to be set-up.
d) Rs.1804 crore will be allocated for skill development.
e) Provision of Rs.1,700 crore to set up 1500 Multi Skill Training Institutes.
f) National Board for Skill Development Certification to be setup through Massive Open Online Courses.
g) The government will pay the Employee Pension Scheme contribution of 8.33% for of all new employees enrolling in EPFO for the first three years of their employment.
5. INFRASTRUCTURE AND INVESTMENT
a) Total outlay for infrastructure in the budget is Rs.2,21,246 crore.
b) Including the Pradhan Mantri Gram Sadak Yojana (for which the total investment is Rs.27,000 crore), the total investment in the road sector will be Rs.97,000 crore. A sum of Rs.55,000 crore has been allocated for roads and highways.
c) The government is likely to approve 10,000 kms of national highways (NHs) this year and 50,000 kms of state highways will be converted to NHs.
d) The government plans to develop new greenfield ports in the eastern and western coasts of India.
e) The Motor Vehicles Act will be amended.
f) Action plan for revival of unserved and underserved airports to be drawn up in collaboration with state governments.
g) Reforms in FDI policy in the areas of Insurance and Pension, Asset Reconstruction Companies, Stock Exchanges.
h) 100% FDI to be allowed in marketing of food products manufactured in India.
i) Steps to revitalise the PPP model:
● Public Utility (Resolution of Disputes) Bill will be introduced this fiscal year.
● Guidelines for renegotiation of PPP Concession Agreements will be issued.
● New credit rating system for infrastructure projects to be introduced.
6. ENERGY
a) A plan to increase gas production from deep-water, ultra deep-water and high pressure-high temperature areas.
b) Comprehensive plan to be formulated for implementation in the next 15-20 years in order to enhance investment in nuclear power generation.
c) Budgetary allocation for nuclear power generation is Rs.3,000 crore per annum.
7. FINANCIAL SECTOR REFORMS
a) A comprehensive ‘Code on Resolution of Financial Firms’ to be introduced providing a resolution mechanism to tackle bankruptcy across financial institutions.
b) The RBI Act of 1934 will be amended to create a statutory basis for a Monetary Policy Framework and a Monetary Policy Committee through the Finance Bill 2016.
c) The SARFAESI Act of 2002 will be amended. The SEBI Act of 1992 will also be amended to increase members and benches of the Securities Appellate Tribunal.
d) A total of Rs.25,000 crore will be infused in PSBs.
e) Target amount sanctioned under Pradhan Mantri Mudra Yojana increased to Rs. 1,80,000 crore.
f) General Insurance companies will be listed in the stock exchange.
8. GOVERNANCE AND EASE OF DOING BUSINESS
a) A Task Force has been constituted for rationalisation of human resources in various Ministries.
b) The government will introduce a bill for Targeted Delivery of Financial and Other Subsidies, Benefits and Services by using the Aadhar framework.
c) Automation facilities will be provided in 3 lakh fair price shops by March 2017.
d) Amendments in the Companies Act of 2013 to improve enabling environment for start-ups.
e) Price Stabilisation Fund with a corpus of Rs.900 crore will be instituted to help maintain stable prices of essential commodities like pulses.
f) “Ek Bharat Shreshtha Bharat” programme will be launched to bring together states and districts in an annual programme that will connect people through exchange of language, trade, culture, travel and tourism.
9. FISCAL DISCIPLINE
a) Fiscal deficit in RE 2015-16 and BE (budget estimates) 2016-17 have been retained at 3.9% and 3.5% of GDP respectively.
b) Revenue deficit target has improved from 2.8% to 2.5% in RE 2015-16.
c) Total expenditure of the Budget has been projected at Rs.19.78 lakh crore.
d) Additional funds will be mobilised by NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority through bonds.
e) Plan and Non-Plan classification of public expenditure will be done away with from 2017-18.
f) The government has restructured over 1500 Central Plan Schemes into about 300 Central Sector and 30 Centrally Sponsored Schemes.
g) A committee will be set up to review implementation of the FRBM Act as the global economy is presently marked by uncertainty.
TAX PROPOSALS: I-T slabs unchanged
The major focus of this year’s tax proposals fell under nine categories, including providing relief to small tax payers, incentivising domestic value addition to help Make in India, using technology to create accountability, among others. Let us now look at the important points as regards taxation plans for 2016-17:
–No changes have been made to existing income tax slabs
–Infrastructure and agriculture cess to be levied. 0.5 per cent Krishi Kalyan Cess to be levied on all services.
– Pollution cess of 1% to be levied on small petrol, LPG and CNG cars; 2.5% on diesel cars of certain specifications and 4% on premium model cars.
– Tax rebate for those earning less than Rs.5 lakh per annum has been increased from Rs.2000 to Rs.5000.
– For those who do not own a house, the limit of deduction of rent paid has been increased to Rs.60,000 per annum.
– The tax surcharge for individuals with over Rs.1 crore income per annum has been raised from 12 to 15% percent.
– Necessary changes will be made in customs and excise duty rates to give impetus to the ‘Make in India’ programme.
– Companies with a revenue below Rs.5 crore will be taxed at 29% plus surcharge.
– Exemption of Rs.50,000 for housing loans up to Rs.35 lakh, so long as cost of house is not above Rs.50 lakh.
– No service tax will be imposed on construction of affordable houses up to 60 sq. m. under state and Central housing schemes.
– A total of 13 cess imposed by various ministries amounting to a revenue collection of less than Rs.50 crore will be phased out.
– Customs Act to provide for deferred payment of customs duties for importers and exporters with proven track record.
– Free baggage allowance will be increased for international passengers. Filing of baggage will be mandatory only for those carrying dutiable goods.
– ‘e-Sahyog’ to be expanded to reduce compliance cost, especially for small taxpayers.
Overall impact of the 2016-17 budget
The key feature of this year’s budget is the relief granted to small taxpayers and small investors. Though, the government has not changed the existing income tax slabs, the budget endeavours to achieve the Housing for All vision by providing ample exemptions on housing loan interest rates. Taxes levied on luxury products like car, jewellery, and cigarettes have been hiked. Government has allocated a lot of funds to develop India’s rural economy. Hence, we can conclude that the nature of the 2016-17 budget is mainly pro-poor. It is viewed by experts as a good attempt to strengthen the rural and agriculture sector, which form the base of Indian economy.
– Written by
Onkar Dichwalkar &
Shraddha Kakade