Given the background against which finance minister Arun Jaitley presented his fourth Budget on Wednesday, namely slow growth and demonetisation’s pain, coupled with global headwinds like Brexit, US President Donald Trump’s America First agenda, increasing oil prices and general uncertainty, it was expected that his proposals would encourage private investment and job creation, while giving generous sops to individuals, specially those who lost their jobs and had to return to their villages.
But little was done on to spur these objectives that would cushion the economy from external negatives. To be fair, he did make a major allocation for the transport system that he hoped would spur economic activity, which was further enhanced by allocations to infrastructure, specially road development. The higher allocation for rural India hasn’t enthused farmers, who note that of the Rs 21.47 lakh crore Budget, Rs 1 lakh crore was for government staff under the 7th Pay Commission award. By that yardstick, the 60 per cent of the population living in rural areas should get Rs 60 lakh crores!
Individuals happily saw taxes halved and capital markets were spared after the fear created when Prime Minister Narendra Modi had said those who benefit by the markets must give something in return. The finance minister had then said the PM’s remarks were misunderstood, and he proved right. A welcome feature of this Budget is the one-page income-tax form for individuals with taxable income upto Rs 5 lakh.
The Budget has got a round of applause for maintaining the fiscal deficit target — this is expected to increase the confidence of foreign investors in India. The scrapping of the Foreign Investment Promotion Board will further attract FDI — an indication that the government expects more foreign funds to flow into the infrastructure sector. The government hopes investment and job creation can be achieved by offering sops to enterprises with less than Rs 50 crore in turnover, where 96 per cent of companies are likely to benefit; and a thrust on infrastructure. The FM also hiked expenditure on the rural employment guarantee scheme, but considering inflation, this is hardly much.
What is puzzling about this Budget is that the agricultural sector was spared of tax. There is no reason why big farmincomes are not taxed. The exemption for agricultural incomes is misused by the urban rich as a way to avoid paying tax. The government showed some political will to curb black money through elections, by restricting cash donations to Rs 2,000 per person. The Budget’s theme was “Transform, Energise and Clean India”, and hopefully this goal will be realised.
