Union Finance Minister Arun Jaitley. Photograph:( PTI )
Four years back, when Modi government presented its first budget, the common public had a lot of expectations. While the government did try to fulfill their desires, there are more and more hopes from Mr Modi with each subsequent budget. The countrymen are still waiting for a feel-good budget which suits everyone’s needs and that too in a situation when the government has extreme financial challenges. Things have not been smooth after the successful implementation of GST and demonetisation.
Let’s analyse the past budgets first. The first thing government had been successful in achieving was the sustained economic growth of 7-8% over the last three fiscals which is considered an achievement keeping in view of the world average of 3.7%. The Finance Minister is hopeful to cross the psychological barrier of 8% very soon. Not only this, the government had been able to achieve a positive and trusted outlook from many rating agencies and, hence, the FDI inflow is good.
The Budget deficit has been reduced to less than 3.5 % from 4.5% in 2014 and the same is further projected at 3.3% in this budget. The Foreign reserves reached a record 420billion USD which was less than 300 Bn$ when this government took over. It is expected to cross mark of half a trillion in this financial year.
The inflation rate has been curbed to 3.8% from 9.4% in 2013 and there had been major growth initiatives by the government. Major defence deals have materialised in this time boosting the confidence of the security forces. Terror activities have been given a befitting response and an effective strategy has been developed to curb red extremism in parts of the country.
So, when Mr Jaitley was presenting the budget today, he surely had a lot of thoughts in mind. Irrespective of the previous industry and economy friendly budgets, this is going to be his last full budget of this tenure of government and keeping in view of the upcoming general elections in 2019, the policies and decisions of the government towards common people will play a vital role. So, the same is reflected in the budget.
The Budget can truly said to be dedicated to farmers and underprivileged people of this country. Announcements like 14.34 lakh crore for infrastructure in villages, doubling the food processing budget to 1400 Cr, 11 Lakh cr for Krishi Credit, MSP for crops to be 150% of production cost and Launch of initiatives like Operation Green, National Bamboo Mission, establishment of Agri Markets, total tax rebate to companies engaged in agricultural production, 32 Lakh houses, 2 Lakh Cr for Smart Cities, Electricity for all, over 2 Cr new toilets and extending the facilities of farmers to fisheries as well as cattle farmers reflect the priorities of government.
Health, hygiene and wellness is another populistic concern and establishing over 1.5 Lakh wellness centres and enhancing budgets for health insurance from 30000 to 5 Lakh per family are the key features. The Government is targeting smooth supply of drinking water in over 500 cities with an allocation of over 19428 Cr in this head.
Few important decisions like establishing new medical colleges among every three parliamentary constituencies, scholarships for technical students and integrated B.Ed. courses are not only boosting the education and employment sector but also likely to help the common people. The universal health coverage is ultimately the target of the government.
Naxalism is a major problem for the country and targeting the root cause of the same, the Finance Minister has made two major announcements, first, opening of residential schools in tribal areas and second allocating over 32000 Cr for tribal development. This is in addition to over 95764 Cr for Scheduled Castes and Scheduled Tribe welfare funds. This is, indeed, a remarkable measure.
The government is keeping 3794 cr for development of Small and Medium Enterprises and over 3 Lakh crores as Mudra Loan which is likely to boost self-employment. Skill-based training of over 50 Lakh youth and promise to generate over 70 Lakh jobs every year reflect Mr Modi’s priorities. However, the government could not do well on this front in the last four years and there is a serious question about the employment generation part. However, 12% contribution in PF for all new employees for three years will bring a smile to common worker.
Cleaning of the Ganga is major challenge and allocation of major funds is done for this. Hope we achieve this. Digital India is given 3037 Cr which is less as compared to high hopes put by the government. However, 10000 crores for development of 5 Lakh Wi-Fi spots in villages give some relief.
Keeping in view of Chinese Aggression, the Defence infrastructure is vital. The government has sanctioned a large number of road, bridges and tunnel projects in the area bordering China and Pakistan, especially in Arunachal Pradesh and Ladakh sector where Chinese threat is imminent.
The Railways is given special emphasis with an allocation of over 1.48 Lakh Crore for their expansion. This included converting entire railway network into the Broad gauge, expansion and modernisation of the railway, making 700 new engines, 5160 coaches, 12000 wagons every year and training of staff for Bullet train operations.
Along with the Railways, air transport is given emphasis too. There are plans to increase the airports in the country by 500% which looks like an impossible task. How government plans to make the number of airports from 124 to 620 it is a real tough question.
Despite many constructive steps he took, Mr Jaitley failed to provide any relief to the salaried person towards tax which was much expected of him. There is a little relief in terms of 40000 standard deductions towards transport and medical reimbursements, however, the tax slabs are still the same. And over and above there is 10% additional tax on income from mutual funds. This will certainly discourage common and small-scale investors.
So, the finance minister has announced many welfare schemes but from where the government is going to get these funds? Mr Jaitley has already thought of generation of funds for all these activities and, hence, planned to disinvest 14 government companies in this year by which he is planning to generate over 80000 Cr. As per him, there is also a net increase of over 90000Cr in revenue due to crackdown over black money and number of the tax payers have increased by over 19.25 Lakh. Direct tax revenue has increased by 12.6% which will further add to the kitty.
10% tax on the long-term capital gain, and increase on cess over health and education was essential and can be taken as a sour pill from the government. After all, the government also needs money to spend. Increase in the custom duty will help to strengthen the local industries for whom there are a plethora of announcements. 25% corporate tax for companies up to 250 cr turnover and 25% tax over MSMEs will act as a boost for Indian companies.
These were the highlights, however, there are major aspects of the budget which needs emphasis. The Defence Budget, including allocation for Defence Production, is not yet clear. The planned economic outlook and emphasis on industrial growth are yet to be ascertained. The common men had been considered well but the country in totality needs to be analysed too. In all aspects, the budget is a populistic one and the projects indicate the seriousness with which the government is approaching Mission 2019.
(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)