Budget 2017 - A Good, Optimal, Reparation Exercise

This budget recognised that demonetisation had brought some hardship to people. So it tried to mitigate that as much as possible, with some rural schemes and reduction in taxation for low income people.

Judging a budget almost eventually always comes down to personal views and opinions based on how the budget impacts that person. Having said that, I feel this was a good budget which has addressed a portion of the general populous which has been overlooked for a few years now, i.e. the rural class.

The Budget offered thrust to core areas (agriculture, infrastructure, the financial sector, and so on) and fiscal prudence. The commitment to maintain fiscal discipline while continuing with rural and infrastructure spending is a positive outcome. Government pegs fiscal deficit target at 3.2 per cent for 2017-18

While 2017’s budget touched on many areas, there were Four Key Themes:

The focus is on ease of doing business, with a big push to rural infrastructure, highways and digital financial inclusion. Abolishing FIPB sends out a great message to investors. Corporate tax relief to MSMEs with a turnover of less than 50 crore to 25% will possibly lead to better compliance. Bringing down the lowest slab for personal income tax to 5% is likely to boost consumption.

Key Numbers

• India’s Economic Size: $2.30 trillion (Recently India has managed to overtake UK's GDP first time in nearly 150 years)
• Total expenditure of this year’s Budget: ₹ 21, 47,000 crore
• Current Account Deficit: 0.3% of GDP
• CPI – 3.63%
•  WPI – 3.39%
•  Forex Reserve - $361 Billion
•  Unemployment Rate – 5% (Highest in last 5 years)
•  Literacy Rate – 74.04%

BIG RURAL BOOST

The budget allocation of 187,200 crore INR for agriculture, rural and allied sector has been the highest ever and represents an increase of 24%. Increased farm credit of INR 10 lakh crore is a step further to have greater access to finance for small and marginal farmers. Further, the creation of micro-irrigation fund of 5,000 crores INR can be very useful for further expanding micro-irrigation facilities to farming community.

FIPB ABOLISHED

Foreign Investment Promotion Board (FIPB) was abolished to ease the inflow of Foreign Direct Investment (FDI). Currently, FIPB offers a single window clearance for applications on FDI in India that are under the approval route. The sectors under automatic route do not require any prior approval from FIPB and are subject to only sectoral laws. Over 90% of the FDI is coming through automatic route. Abolishment of FIPB and proposed liberalisation of the FDI policy indicate that foreign funds will be welcome even in sensitive sectors which were previously under the approval route.

DIGITALISATION

An Aadhaar-enabled payment system will be launched soon for people without mobile phones. This will lead the country’s transition to a digital economy. Aadhaar Pay app enables consumers to pay without any physical payment instrument. It runs on the Android platform and has to be installed by merchants.

INFRASTRUCTURE

Capital expenditure has been increased by 25.4% and a total allocation of ₹ 39, 61,354 crore has been made for infrastructure. While over the past 2 years revenue expenditure’s annual growth was around 12-13% and capital expenditure was around 6-7%, this is the first time in many years were focus is back to capital expenditure.

INDUSTRY

There is big relief for MSME. Corporate tax has been reduced from 30% to 25% for small companies with turnover of less than ₹ 50 crore. MSME constitutes to around 96% of Indian companies, contributes to around 45% of India’s economy and one of biggest job generators. This would mean that small and medium scale companies and also the new companies can claim the benefit of this section. One more key highlight was individuals and HUFs are required to pay income tax @ 30 percent for income above ₹ 10 lakh. The idea is to promote private limited companies, which is a more structured form of business organisation. This is a very welcome step for all start-ups, small and medium enterprises functioning under the company form.

FUNDING OF POLITICAL PARTIES

Stressing the need for transparency in political funding, maximum amount of cash donation by an individual to a political party has been reduced to ₹2,000 – a sharp drop from the previous ₹20,000 limit. The intent looks good but in addition there should also be cap on the number of sources/people for further impact.

In the wake of demonetisation, the decisive push towards digital is on expected lines. This Budget clearly reflects the government's stated priorities and long-term agenda. Overall, it is a very well-rounded budget with concrete steps to increase India's attractiveness and foreign fund flow.