Union Finance Budget 2017–18: A Landmark Budget
This year’s Union budget 2017, presented by the honourable finance minister of India Arun Jaitley can be easily termed as one-of-its-kind landmark budget. Apart from many first milestones such as the bold step of moving away from norms by pulling up the date to 1st February from 28th February (pre-colonization era legacy being carried year after year) and shifting paradigm by combining railway budget with the finance budget.
This year’s budget immediately followed the 50-day period demonetization started on 08th November, 2016 (read blog: Demonetization : A Bold Step to Weed Out Black Money). The common man of India — villagers, house wives, salaried class, daily wager, small enterprise businessman, industrialist; all had huge expectations build up from the windfall encashed by the government (approximately 3 lakh crores) and the unconditional support meted out by them during the demonetization period.
As a finance expert with sound understanding of Indian and world economics, I make all the efforts to keep abreast with latest in economy especially policies which govern the common masses. I too was keenly awaiting this year’s budget with my set of expectations (read the blog: What to Expect From 2017 Union Finance Budget). Today, as I reflect on the Union Finance minister’s speech addressed to the full house in Parliament, I can say with ease that the government is keen and making all the efforts towards the holistic development of India.
I would like to briefly educate my followers on the premise that the government sets out to frame the budget. As I had stated in my previous blog (read the blog: What to Expect From 2017 Union Finance Budget), it’s a very tough exercise as the government has to balance the expectations of the masses and the balance sheet of the country. There are five basic objectives the government considers while framing the budget, these are:
1. Allocation of all the available resources in the country so that they can be equally accessed by every citizen.
2. Bridging the economic gap between the rich and the poor. This is done by taxing the rich and including the poor in various socio-economic welfare schemes.
3. Bridging the infrastructural gap between developed areas such as urban and semi-urban cities with all facilities and rural area which have no facilities at all.
4. Providing funds for public enterprises by channelizing tax collected to new and existing socio-economic welfare schemes run by the government.
5. Long-term growth of country’s economy — the government lays down sectoral plans for increase in infrastructural development, technology, employment and investments.
On analysing the fine print of the budget in detail, we realize that the Union Finance Minister has done an excellent job by first assimilating the need of various sectors and sections of the society. It is a very forward-looking progressive budget aimed at overall development of the country not only in short-term but long-term as well. Keeping these in mind, it is the first time the budget encompasses the entire gamut of major sectors or sections such as rural, agriculture, defence, skilling the youth, and infrastructure that require intense focus for future development of India. Let me now briefly explain the key provision of the budget so that the readers can appreciate my view:
· Income Tax and Goods & Services Tax (GST)
o The personal tax rate has been reduced to 5 % from existing 10% for income falling within the slab of Rs. 2.5–5 lakhs. This is a major step in making India an inclusive economy by increasing the tax pool and letting majority of people to participate in nation building. As of today, only 76 lakh individual assesses who declared income of above 5 lakh and of this 56 lakhs are salaried class. The government has been categorically stating that the tax burden on an honest tax payer needs to reduce and culture of tax avoidance needs to be done away with.
o Goods and Services Tax (GST) or one country one tax regime is one step towards an equitable and inclusive economy. Once implemented on 1st July, 2016 it will help elevate India’s position in Ease of Doing business, remove the confusion of double taxation and encourage Foreign Direct Investment (FDI).
· Boost for Rural and Agri-based industries: In this budget, the government has given utmost priority to the rural, agriculture, and allied industries. Some of the key provisions are:
o 1,87,223 crore has been earmarked for the rural, agri, and allied industries. This will help boost the rural economy and bring the much-needed impetus to the poor farmers and rural industries.
o 10 lakh crore has been kept aside for loans to the farmers and people living in rural areas. These loans will be provided at low rate of interest with other easy repayment facilities. Farmers will also benefit from 60 days’ interest waiver announced on 31 Dec 2016
o Government is encouraging crop insurance. As per statistics, only 30% of cropped area are insured, the government aims to increase it to 50% by 2019. Finally, the government aims at 100% insurance so that the poor farmer does not get impacted by the uncertainties of nature.
· Boost to Affordable Housing — In an unprecedented move, the government has included a built-up house upto 60 meters under infrastructure category. In addition, loans for these affordable houses will be provided at low rate of interest. Government plans to make 1 crore such affordable houses by the year 2019.
· Youth Upskilling — India is credited with a high percentage of youth population who can contribute towards nation building. Keeping this in mind, under ‘Skill India’ programme, government has planned to increase skill centres from 60 to 600. In addition, the government under the able guidance of PM plans to upskill 3 crore youth under PM Sankalp Yojana in skill-based work and also build 100 international level skill enhancing centres.
· Boost to Digital India — Carrying the inertia generated from the demonetization, government plans to leverage the BHIM app in a big way. Provision has been made to install 20 lakh Aadhar-enabled Point of Sales (POS) machines across India for making digital payments a reality.
· Fiscal deficit consolidation — The government has been able to drastically control the fiscal deficit to 3.2% of GDP. This is a great effort. However, the government is going out to bring it under 3% by the end of it term.
· Windfall for MSME — MSMEs are the backbone of Indian economy who employ maximum people. With an aim to encourage MSMEs thrive in a competitive environment, the government has proposed to reduce tax from 30% to 25% for all MSME companies reporting turnover less than 50 crores. The finance minister, in his speech mentioned that 96% of companies will get this benefit of lower taxation.. However, there is a caveat here as majority of the MSMEs are not registered (According to the fourth All India Census of MSMEs, more than 92% of the enterprises are unregistered) and in non corporate form and then there are many industries with turnover less than 50 crores who will end up benefiting from this provision. I also take this opportunity to help the followers understand what is the definition of MSME (source: www.msme.gov.in)
Manufacturing Sector (defined in terms of investment of Plant and Machinery)
Investment in Plant and Machinery
Does not exceed twenty-five lakh rupees
More than twenty-five lakh rupees but does not exceed five crore rupees
More than five crore rupees but does not exceed ten crore rupees
Service Sector (defined in terms of investment of Equipment)
Investment in Equipment
Does not exceed ten lakh rupees:
More than ten lakh rupees but does not exceed two crore rupees
More than two crore rupees but does not exceed five core rupees
CA Sunil Kumar Gupta
Business Expert, Economist, Author & Philanthropist