With the recent uproar on Demonetization and restructuring in the political frameworks of the Indian administration, the economy was waiting with bated breath for the Union Budget 2017-2018 to be unveiled. During his Budget speech, Finance Minister Arun Jaitley, spoke at length about certain primary areas of concern and they were:
- Farming sector
- Rural Population
- The poor and the underprivileged
- Financial structure for stronger institutions
- Digital Economy
- Public services
- Prudent fiscal management
- Tax administration
Along with a lot more transparency being vivid in the system, CPI-based inflation has declined from 6% in July 2016 to 3.4% in December 2016. The US Federal Reserve intends to increase policy rates leading to lower capital inflows and higher capital outflows from emerging economies across the globe. Albeit the unfavorable circumstances prevailing, India’s CAD declined from about 1% of GDP last year to 0.3% of GDP in the first half of 2016-17. Along with these developments, FDI grew by 36% and foreign exchange reserves have also seen a new high of 361 billion USD.
Budget 2017-18 has allocated a sum of 10 lakh crore INR credit to farmers along with a waiver of 60 days’ interest. This time around allocation to NABARD also saw an increase, making the new level to Rs. 40,000 crore. Irrigation corpus has received an allocation of 20,000 crores, thus doubling its corpus and dairy processing fund will be created with a corpus of 2,000 crore INR.
GOI has also announced setting up of mini labs in Krishi Vigyan Kendras for soil testing along with the issuance of soil cards.
THE YOUTH, THE POOR & THE UNDERPRIVILEGED
Not surprisingly and convincingly, the government has this time too identified education as the major concern. 3,479 backward blocks have been identified and they would be the focus for the Modi Government. Every nook and corner of the country, new colleges are sprouting leading to unwanted levels of privatization of education. To check the same, Centre has announced that colleges will be identified based on accreditation.
In the recent past, HRD Minister Smriti Irani had proposed the introduction of the German language in the Indian curriculum. Budget 2017 has put its stamp on it announcing the introduction of courses on a foreign language for all. 100 international centers of Skill India are going to be set up across the country along with creating 5000 post-graduation seats for the young ones.
INFRASTRUCTURE & RAILWAYS
Infrastructure sector has received a net corpus of 39,61,354 crore INR and among this, 64,000 crore is for highways. GOI has targeted the complete elimination of unmanned level crossings by the year 2020. Administration at all levels is being taken seriously and for the same, high-speed internet is to be provided to 1,50,000 gram panchayats.
Railways added 1,31,000 crore INR to its kitty. By the day, India is becoming more and more tech-savvy and the government plans speak volumes about it. With the increasing use of IRCTC, it was high time for the GOI to remove service charge on tickets booked and the step has finally been taken. Keeping pollution under consideration, GOI has proposed the implementation of bio-toilets in all trains by 2019. Additional 700 Kms of railway lines is to be commissioned this fiscal along with making 500 stations differently-abled friendly.
ENERGY & DEFENCE SECTOR
The economy is slowly trying to recover from the coal allocation mismatches. Also, to sustain the competitive oil prices in the global market, the government has aimed at setting up a strategic policy for crude reserves. It has announced the launch of Trade infra export scheme in 2017-18 itself. With a long vision, 1.26 lakh crore INR has been received for the energy production based investments. The defense sector has been given an allocation of 2,74,114 crore INR.
The Indian government has always had a tax revenue disproportionate to its population. Out of 13.14 lakh registered companies, only 5.97 lakh firms filed returns for 2016-17. Modi government has calculated a net revenue loss of 20,000 crore INR through direct taxes. For ensuring transparency, the upper limit of cash transactions has been set as 3 lakh INR. For firms having turnover up to Rs. 50 crore, corporate tax has been reduced to 25%. Some more calculations show that 96% of the companies are in this category. Centre has also proposed to have a carry-forward of MAT for 15 years. Alongside, customs duty for LNG has been proposed to be reduced from 5% to 2.5%. In order to keep a check on corruption, transactions above INR 3 lakhs would cease to be legal. Additionally, the limit of cash donation by charitable trusts has been reduced to INR 2,000 from INR 10,000.
Tax brackets have also been revised making it easier for the lower income groups. For individuals earning between 2.5 to 5 lakh INR per year, the tax rate is 5%, half of the earlier 10%. This would entail a lot of transparency in the system thus adding to the corpus of Indian economy. For the higher income groups, 10% surcharge on the ones earning within 50 lakhs and one crore INR per annum. This would aid the government in making up for the 15,000 crore loss due to cut in personal Income tax rates. For the ones earning above a crore per annum, this surcharge would be 15%.
FINANCIAL SECTOR & POLITICAL PARTIES
Budget 2017 announced the abolition of Foreign Investment Promotion Board along with the announcement of passing a bill on the resolution of financial firms. This fiscal onwards GOI has decided to automate more than 90% of FDI inflows. Among other targets of the government, fixing Pradhan Mantri Mudra Yojana lending limit at 2.44 lakh crore INR for 2017-18 is also one.
With an uproar of digital payments in the age of demonetization, political parties are also supposed to receive donations through cheque or in digital mode. Also, the maximum amount of cash donation that a political party is liable to get from any one source has an upper limit of INR 2,000 henceforth.
Among a total expenditure of Rs. 21,47,000 crore, Rs. 3,000 crore is under the Department of Economic Affairs for the implementation of Budget announcements, science and technology is to receive Rs. 37,435 crore and net resources transferred to states and union territories are Rs. 4.11 lakh crore. With a capital expenditure of 25.4%, GOI is looking forward to abolishing planned and non-planned expenditure. The government has recommended a 3% fiscal deficit for 3 years with a deviation of 0.5% of the GDP and a revenue deficit of 1.9%.
GOI has taken some of the massive steps this year such as slashing tax rates by 50% in certain cases to making huge investments in digitization of services. It would be interesting to note how many of this corruption checking mechanisms yield results in the long run and whether the provisions help India become a developed economy from a developing one. As of now, the re-election of PM Modi depends hugely on this budget and its repercussions.
By: Priti Kumari Jha & Rajat Khetan, XLRI Jamshedpur