In a politically crucial period with several State elections up to 2017 first half, widespread rural distress, stagting corporate investment and public sector banks under pressure, Fince minister Arun Jaitley has kept a wary lookout on several fronts in his budget for 2016-17. He has announced higher outlays for the farm sector, given some relief to the middle class, hiked public spend in infrastructure by 22.5 per cent, and has aimed to keep up the growth momentum without borrowing more. Referring to the global economy in crisis, Jaitley has set out his three priorities — prudent fiscal magement to ensure macroeconomic stability, relying on domestic demand to drive growth, and ‘reforms to boost economic opportunity’. With the farm sector reeling from two successive droughts, agricultural growth in 2015-2016 pegged at a mere 1.1 percent and reported upswing in cases of farmer suicides, the Fince minister has proposed a huge outlay of Rs 35,984 crore for this sector. To help farmers in the unequal battle against tural disasters triggered by climate change, the budget proposes an agricultural credit target of Rs 9 lakh crore, the highest ever for a fiscal. Other initiatives include irrigation fund of Rs 20,000 crore, a Rs 60,000 crore project to develop safe groundwater sources, Rs 8,500 crore for rural electrification with target of cent per cent coverage by May 1, 2018, Rs 5,500 crore to the PM Fasal Bima Yoja with highest ever compensation to cover crop loss, a 0.5 percent tax on all taxable services under Krishi Kalyan tax, a Rs 500 crores program to raise pulses output and bringing about 5 lakh acres under organic farming in three years. The Fince minister hopes such measures will help double farmers’ incomes in five years, though he has avoided bringing rich farmers under the tax net as recommended by the Economic Survey.
Apart from keeping income tax slabs unchanged, Jaitley’s budget has made some concessions for small taxpayers like raising the ceiling of tax rebate for incomes up to Rs 5 lakh per annum from Rs 2,000 to Rs 5,000, raising the tax exemption for house rent allowance from Rs 24,000 to Rs 60,000 for those who don’t get the allowance from their employer, deduction for additiol interests of Rs 50,000 per year for loans up to Rs 35 lakh sanctioned in 2016-17 for first time home buyers, and health insurance cover of up to Rs 1 lakh per family with additiol Rs 30,000 for senior citizens. However, for larger tax payers with incomes exceeding Rs 1 crore per year, the income tax surcharge has been hiked from 12 to 15 percent. The service tax rates have also not been touched, remaining at 14.5 percent (inclusive of 0.5 percent Swachh Bharat cess). The Fince minister has however made it clear that customs and excise duty rates will be hiked suitably to push ‘Make in India’, the Prime Minister’s dream programme. He has also asserted that the government will not only meet the fiscal deficit target of 3.9 percent of GDP this fiscal, it will set the target at 3.5 percent for the next fiscal. Infrastructure building figures highly in this budget, with the road sector allocated Rs 97,000 crore while Rs 1,21,000 crore has been earmarked for the Railways. What inspires some hope is that about 85 percent of stalled road projects are sought to be put back on track. There is also the proposal to make vehicles pay for this infrastructure as well as deal with pollution, with 1 percent cess to be levied on small petrol-CNG cars, 2.5 percent on diesel cars and 4 percent on high-powered vehicles.
The Fince minister hopes to slash the subsidy burden on food, fertiliser and petroleum by over four percent and bring it down to nearly Rs 2.31 lakh crore in 2016-17. At the same time, he has proposed universal coverage of cooking gas in the country, targeting all poor households. As for the stressed banking sector, Jaitley has set aside Rs 25,000 crores for the recapitalization of State-owned banks, lower than what the Economic Survey has recommended and the markets expected. Overall, the NDA government is seeking to review the very exercise of budget making by proposing a committee to examine the Fiscal Responsibility and Budget Magement (FRBM) Act. Significantly, this budget has also proposed scrapping the classification of plan and non-plan expenditure from the next fincial year. This proposal, if implemented, will further force State governments to put their finces in order as it is non-plan expenditure that keeps ballooning year after year. The budget proposal to set up a technology driven platform for government procurement of goods and services is also welcome in the interests of improved transparency and efficiency. The 2016-17 budget is thus a conscious attempt by the rendra Modi government to change tack midway and thereby avoid the pitfall of ‘Shining India’ at the expense of stagting Bharat, which was the cause of undoing of the previous NDA government. The Opposition’s tag of a ‘suit-boot ki sarkar’ working for crony capitalists seems to have hit home.