New Delhi: Union finance minister Arun Jaitley on Wednesday offered a healing touch to those hit by the “painful” demonetisation process by providing tax relief to middle-class taxpayers and small businesses, and giving sops to farmers in what’s being seen as a “payback” Budget.
He allocated Rs 48,000 crore to India’s flagship rural job guarantee scheme MGNREGA. He also gave a major boost to the infrastructure sector by allocating Rs 3.96 lakh crore.
The Rs 2.4 lakh crore for transport infrastructure will act as a counterforce to the slowdown triggered by cash crunch after Prime Minister Narendra Modi’s shock move late last year to demonetise old Rs 500 and Rs 1,000 notes, and will also create jobs.
Mr Jaitley said that the pace of remonetisation has picked up, and will soon reach comfortable levels. “The effects of demonetisation are not expected to spill over into the next financial year,” he said.
With elections only days away in crucial states including Punjab and Uttar Pradesh, Mr Jaitley proposed Rs 10 lakh crore in cheap loans to farmers. Allocation for scheduled castes (SC) has been increased to Rs 52,000 crore for the next fiscal year from Rs 38,000 crore in the current year. Support of both groups is crucial in the poll-bound states.
The overall allocation for the rural, agriculture and allied sectors in 2017-18 is Rs 1,87,223 crore, which is 24 per cent higher than the previous year. Mr Jaitley promised to build one crore houses by 2019 for the homeless.
With the Narendra Modi government’s focus on black money, Mr Jaitley announced a major electoral funding reform by restricting cash donation from a single person to Rs 2,000. He also accepted the recommendation of the Special Investigation Team on black money that no cash transaction over Rs 3 lakh will be permitted. He proposed new legislation to confiscate assets of economic offenders fleeing the country to escape the law, and announced a new law to deal with ponzi schemes.
The minister slashed personal income tax to 5 per cent from 10 per cent on incomes between Rs 2.5 lakh and Rs 5 lakh. The government will give a benefit of Rs 12,500 to subsequent categories.
However, the minister proposed 10 per cent surcharge on individuals whose annual taxable income is between Rs 50 lakh and Rs 1 crore, which will result in additional tax liability of almost Rs 2.77 lakh at the top end of this income range.
Small businesses, which deal mainly in cash and were hit by demonetisation-induced liquidity crunch, also saw their corporate tax cut to 25 per cent from 30 per cent.
Many called it a “please all” Budget with no major negative for any sector. Markets heaved a sigh of relief with Sensex zooming by 486 points as Mr Jaitley didn’t impose any long-term capital gain tax on shares trading as many feared.
He also promised to abolish the Foreign Investment Promotion Board (FIPB) to make it easier for foreign investment to come into the country, and indicated further liberalisation in India’s FDI regime.
Mr Jaitley adhered to fiscal consolidation roadmap and set a target to bring down fiscal deficit to 3.2 per cent of the GDP in 2017-18. This despite pressures to increase spending, and FRBM Review Panel headed by former revenue secretary N.K. Singh providing for a ‘escape clauses’, for deviations upto 0.5 per cent of the GDP, from the stipulated fiscal deficit of 3 per cent. This should be seen positively by the global rating agencies which have till now refused to upgrade India’s rating despite improvement on macro-economic indicators.
In view of the fact that the proposed GST is expected to be rolled out soon, he left indirect taxes largely untouched except for some changes in duties on tobacco products, solar panels and circuits for mobile phones.
Mr Jaitley’s proposal to set up an oil major, and announced capital infusion of Rs 10,000 crore for state-owned lenders.
