Madam Speaker,
This year’s Budget comes amidst a number of uncertainties, global and domestic, such as the US elections, Brexit, demonetisation, removal of Plan and non-Plan classifications of expenditure and an ambitious fiscal deficit target. Given this background, the Government has ensured it is prepared for contingencies arising out of these uncertainties while meeting people’s expectations and investing in the country’s future.
Merger of Rail Budget
The merger of the Rail Budget with the Union Budget provides a more holistic outlook on the Railways and is expected to reduce the subsidy expense by ₹10,000 crore. This will, instead, be borne by the respective ministries. The Government will invest heavily in railway infrastructure development and enhanced operational efficiency and safety.
Besides a nominal increase in fares, the alternative revenue streams and funding initiatives taken up last year shall be continued and expanded. The modernisation of the Indian railways is long overdue and, when implemented, will catalyse the economy.
Fiscal deficit target
Having advanced the Budget presentation to February 1, the capital expenditure cycle can begin from March 1. However, releasing the revenue projection in February has reduced the GDP data available in the current year. This increases the uncertainty in GDP growth and revenue projections. Besides that, to fuel GDP growth, the fiscal deficit target for FY 2017-2018 has been pegged at 3-3.25 per cent instead of a single-point target of 3 per cent.
A digital push
The economy is yet to stabilise after the demonetisation drive. To further develop a digital India, an Aadhar card-based biometric-enabled payment system is expected to be implemented in the next six months. Service tax on all transactions made using Aadhar-based payments through credit/debit cards will be removed for the year.
Agriculture sector
The agriculture sector is the backbone of our economy and has been suffering due to low rainfall for three consecutive years. To provide economic security to the farming community, the Government will increase the MGNREGA budget to ₹45,000 crore.
Corporate tax
The Government is committed to making the tax regime industry-friendly. For this, the GST will be implemented by July 1. This will remove multiple State levies and consolidate them into one. This will be followed by a 2-3 per cent reduction in corporate tax in the second half of the fiscal year. GST will also reduce the cost of tax compliance for the unorganised sector, incentivising them to move to the organised sector, and thereby increasing the tax base.
Personal tax
The Government understands the concerns of the salaried population and has decided to increase the Section 80C exemption to ₹2 lakh from the current ₹1.5 lakh. To reduce the effect of declining interest rates on fixed deposits, the securities transaction tax on purchase of equities is being removed so that people can invest in the growing equity market at lower costs. To fund the Government’s initiatives, we will retain the surcharge of 15 per cent, implemented last year, on those earning more than ₹1 crore a year.
The interests of the lower and middle classes have been given importance. The country is at the cusp of change and we have tried to balance present needs with those of the future by investing in railways and digital payments, and reducing corporate taxes.
(The views expressed in the article are personal and are endorsed neither by the institute nor the director.)