Soon after finance minister Arun Jaitley finished presenting Union Budget 2017, the stock markets spiked in what can only be described as a relief rally. Why? Because there was no bad news in the budget. And in the current context, the absence of bad news is actually good news.
Income tax slabs and tax benefits
Sticking with the good news, the income tax rate was reduced by five percentage points to 5% for people earning between Rs2.5 lakh and Rs5 lakh a year. And everyone in the higher tax slabs gets a uniform tax benefit of Rs12,500. Sure, there is a tax surcharge for people earning between Rs50 lakh and Rs1 crore a year (that those earning over Rs1 crore already pay), but there’s no way the finance minister could have offered any sops to those in the higher income groups.
In some ways, Union Budget 2017 was a budget for Bharat. There was a lot of focus on the agricultural sector and the rural economy, in terms of development of infrastructure and increase in spending, but also in terms of attempts to make it more market-oriented.
• Total support to rural and agriculture sector raised by 24%, to Rs1.87 trillion
• Push for agricultural marketing reforms, new model law on contract farming
• Rs9,000 crore for crop insurance, up from Rs5,500 crore in Budget 2016-17
• Rs10,000 crore push for rural jobs programme, allocation up to Rs48,000 crore in Budget 2017-18
• Rural housing gets Rs8,000 crore boost, allocated Rs23,000 crore in Budget 2017-18
But the budget is also growth-oriented. It envisages an increase in capital spending of 25.4%, and emphasizes the creation of infrastructure…
• A new integrated infrastructure planning paradigm comprising roads, railways, waterways and civil aviation with a provision of Rs2.41 trillion for the transportation sector as a whole
• A combined rail and Union budget, with the national carrier allocated Rs1.31 trillion for capital and development expenditure
• Indian Railways to list its subsidiaries—Indian Railway Catering and Tourism Corporation, Indian Railway Finance Corporation and Ircon International Ltd.
• A Rs1 trillion railway safety fund to be created.
• National highways allocation increased to Rs64,900 crore from Rs57,976 crore in 2016-17.
• Plan to amalgamate existing labour laws into four codes of wages; social security and welfare; industrial relations; and safety and working conditions
• Abolishing the Foreign Investment Promotion Board (FIPB) that vets foreign direct investment proposals
• Income tax for smaller firms with annual revenue of up to Rs50 crore reduced to 25% from 30.26%
•To encourage electronic manufacturing, allocation for incentive schemes such as modified special incentive package scheme (M-SIPS) and Electronic Development Fund (EDF) increased significantly to Rs745 crore in 2017-18
• Ban on all cash transactions above Rs3 lakh
• Installation of 1 million Aadhaar-enabled point-of-sale (POS) machines by March, which will be scaled up to 2 million by September
• Tax exemptions for manufacturing of POS card readers, mobile POS (mPOS) systems, fingerprint readers and iris scanners
• Two new referral schemes to promote digital payments on Bharat Interface for Money (BHIM); one will be a bonus scheme for customers and the other will be a cash-back scheme for merchants
• Tax relief for small businesses using cashless systems
The Union budget also does all this without denting the fisc; it even engages in some introspection and announces some reforms in political funding.