Changing The Colours Budget 2016
Affirming that the economy is right on track, Finance Minister Arun Jaitley presented the Union Budget for 2016-17. Arun Jaitley’s budget speech gave an indication as to a poignant shift in the NDA government’s economic and political outlook from its belief in big-ticket foreign and domestic private investments to reliance on rural India to drive the economy.
The budget offered something to every section — doubling farmers’ income by 2022, a thrust on rural infrastructure to create jobs, incentives for senior citizens and middle-class people living in rented houses and aspiring to own one.
At an election rally in Bihar last year, Prime Minister Narendra Modi had talked about the plight of women who had to light chulhas to cook food for their children. He said he understood their pain as his mother also did the same. Following his PM’s dream, Jaitley brought much relief to such mothers as he announced a mission to provide them LPG connections with government subsidy.
The Budget 2016-17 seems to be all-pleasing. Finance Minister Jaitley has given something to every sector. Let us have a look at all the sops promised in the budget.
Infrastructure and agriculture cess is to be levied. Excise duty is raised from 10 to 15 per cent on tobacco products other than beedis. 1 per cent service charge is to be levied on purchase of luxury cars over Rs. 10 lakh and in-cash purchase of goods and services over Rs. 2 lakh. SUVs and Luxury cars is to become more expensive. 4 per cent high capacity tax will be levied on SUVs. Companies with revenue less than Rs 5 crore is to be taxed at 29 per cent plus surcharge Limited tax compliance window from Jun 1 – Sep 30 is cleared for declaring undisclosed income at 45 per cent including surcharge and penalties Excise tax of 1 per cent is imposed on articles of jewellery, excluding silver. 0.5 per cent Krishi Kalyan Cess is to be levied on all services. Pollution cess of 1 per cent on small petrol, LPG and CNG cars; 2.5 per cent on diesel cars of certain specifications; 4 per cent on higher-end models is proposed. Dividend in excess of Rs. 10 lakh per annum is to be taxed at additional 10 per cent.
No changes have been made to existing income tax slabs. Rs 1,000 crore has been allocated for new EPF (Employees’ Provident Fund) scheme. Government will pay EPF contribution of 8.33 per cent for all new employees for first three years. Deduction for rent paid will be raised from Rs 20,000 to Rs 60,000 to benefit those living in rented houses. Additional exemption of Rs. 50,000 for housing loans up to Rs. 35 lakh, provided cost of house is not above Rs. 50 lakh. Service tax is exempted for housing construction of houses less than 60 sq.metre. 15 per cent surcharge is to be levied on income above Rs. 1 crore.
Rs. 38,500 crore allotted for Mahatma Gandhi NREGA for 2016-17. Swacch Bharat Abhiyan is allocated Rs.9, 500 crores. A Hub to support SC/ST entrepreneurs is proposed. Government is launching a new initiative to provide cooking
gas to BPL families with state support. LPG connections is to be provided under the name of women members of family: Rs 2000 crore allocated for 5 years for BPL families. 2.87 lakh crore grants to gram panchayats and municipalities – a quantum jump of 228 per cent. 300 urban clusters is to be set up under Shyama Prasad Mukherji Rurban Mission. Four schemes for animal welfare are proposed.
2.2 lakh renal patients are added every year in India. Basic dialysis equipment gets some relief. A new health protection scheme for health cover upto 1 lakh per family is announced. National Dialysis Service Program with funds through PPP mode to provide dialysis at all district hospitals. Senior citizens will get additional healthcare cover of Rs 30,000 under the new scheme PM Jan Aushadhi Yojana is to be strengthened 300 generic drug store to be opened.
Scheme to get Rs.500 crore for promoting entrepreneurship among SC/ST is announced. Plan to make 10 public and 10 private educational institutions world-class is announced. A Digital repository for all school leaving certificates and diplomas is planned. Rs. 1,000 crore was allotted for higher education financing. Rs. 1,700 crore was allotted for 1500 multi-skill development centres. 62 new navodaya vidyalayas to be set up to provide quality education. Digital literacy scheme is to be launched to cover 6 crore additional rural households Entrepreneurship training is to be provided across schools, colleges and massive online courses. Objective to skill 1 crore youth in the next 3 years under the PM Kaushal Vikas Yojna is proposed. National Skill Development Mission has imparted training to 76 lakh youth. 1500 Multi-skill training institutes is to be set up.
Rs. 3000 crore earmarked for nuclear power generation. Government is drawing comprehensive plan to be implemented in next 15-20 years for exploiting nuclear energy Government to provide incentive for deepwater gas exploration. Deepwater gas is the new disc to get calibrated market freedom, pre-determined ceiling price based on landed price of alternate fuels.
Investments and infrastructure
Rs. 27,000 crore is to be spent on roadways. 65 eligible habitats is to be connected via 2.23 lakh kms of road. Current construction pace is 100 kms/day. Shops is to be given option to remain open all seven days in a week across markets. Rs. 55,000 crore is allocated for roads and highways. Total allocation for road construction, including PMGSY is Rs 97,000 crore. India’s highest-ever production of motor vehicles was recorded in 2015. Total outlay for infrastructure in Budget 2016 now stands at Rs. 2,21,246 crore. New greenfield ports is to be developed on east and west coasts. Reviving of under-served airports. Centre to Partner with States to revive small airports for regional connectivity. 100 per cent FDI in marketing of food products produced and marketed in India. Department of Disinvestment is to be renamed as Department of Investment and Public Asset Management. Government will amend Motor Vehicle Act in passenger vehicle segment to allow innovation. MAT will be applicable for start-ups that qualify for 100 per cent tax exemption. Direct tax proposals result in revenue loss of Rs.1060 crore, indirect tax proposals result in gain of Rs.20,670 crore.
Total allocation for agriculture and farmer welfare is at Rs 35984 crores. 28.5 lakh heactares of land will be brought under irrigation. 5 lakh acres is to be brought under organic farming over a three year period. Rs 60,000 crore is allotted for recharging of ground water as there is urgent need to focus on drought hit areas cluster development for water conservation. A Dedicated irrigation fund of Rs. 20,000 cr will be created in NABARD. Nominal premium and highest ever compensation in case of crop loss under the PM Fasal Bima Yojna is announced.
Banks get a big boost: Rs 25,000 crore towards recapitalisation of public sector banks. Banking Board Bureau will be operationalised, we stand solidly behind public sector banks, emphasised the FM. Target of disbursement under MUDRA increased to 1,80,000 crore. Process of transfer of government stake in IDBI Bank below 50 per cent is started. General Insurance companies will be listed in the stock exchange. Government is to increase ATMs, micro-ATMs in post offices in next three years.
The marked shift in the government’s focus came against a backdrop of a year of electoral reverses, be it in the Delhi and Bihar assembly elections or in the civic polls in many BJP-ruled states. Coming as it did before the assembly elections in four states and one union territory in April-May, Budget 2016-17 is expected to help the BJP counter the Opposition’s projection of the NDA government as anti-poor and a suit-boot ki sarkar. Some analysts can term it a “political budget” but Jaitley offered a sound economic rationale for this. Given that foreign markets are weak, he has to rely on domestic demand and Indian markets. Besides, as the recent agitation by the Jat community indicated, there is growing unrest among agrarian communities.
Successive spells of a weak monsoon have made it worse for farmers. An economic slump has meant fewer new jobs, causing unrest among the youth as well. The Finance Minister obviously had all these factors in mind as he announced huge investments in rural infrastructure, especially the irrigation sector.
There are all the right key words in the Finance Minister’s 9-Point agenda in this budget. Focusing on governance and ease of doing business, the budget lays emphasis on education and skills, infrastructure, financial Sector and tax reforms which reflect dedication towards a pro technology, infra and trade oriented year ahead. The budget intends to build robustly agriculture and farmers welfare, social sector and rural employment to further bridge the gap between Bharat and India.
By Nilabh Krishna