Friday, 3 February 2017


Iss mod pe ghabra ke na tham jaiye aap 
Jo baat nayi hai usse apnaiye aap 
Darte hain nayi raah pe kyun chalne se 
Hum aage-aage chalte hain aazmaiye aap 

These beautiful lines sums up the budget presented by Honorable Finance Minister Arun Jaitley for 2017-18.

The Finance Minister presented the Union Budget for 2017-18 in what is a period of transition for the economy. On the one hand, the economy is recovering from the effects of demonetization. On the other hand, there is the impending roll out of the GST which promises to completely transform the indirect tax regime in the country.

In this context, the choice for the FM was to either stay true to the reform and fiscal consolidation path or to play for populism as was the demand by a section of the media.

It is a great positive that the FM has chosen to stay away from the populist path.

Over the course of time, the government has sharply reduced inefficient subsidies making way for more targeted allocation and focus on the farmer’s income and housing sector reforms.

So basically the budget is about Fiscal prudence, consumption boost and investment push. Dalal street giving a big thumbs up by big rally proves the same 

I Shall give my analysis of few key take away from budget. What is in budget is all over the media so it is better I  skip on bullet points. I shall try my best to present the facts either not given due importance or not discussed much.

 Shall be my effort to use simple language and not legally confusing so that I can put across message to large spectrum of readers


The budget pledged a record agricultural credit of 10 trillion rupees in the fiscal year through March 2018, as well as 480 billion rupees for a rural job guarantee program and electrification of villages by May 2018 

Almost half the budget is dedicated to rural areas, which should certainly have consumption growth happening in the rural areas

The ten focus areas that the finance minister spoke about are bang on. As I said in my interview earlier agriculture and rural-sector spending are really important as more than 60% of our population is dependent on the same.

He allocated funds for irrigation ( our farmers are still dependent on monsoons) as well as Dairy farming that shall be big income drivers for rural sector.

The same has huge impact on consumption. With more money in hands of farmers we can easily look at spending on consumer durable, Tractors, Two wheeler and cars. So the much needed stimulus to boost consumption has been taken care of 

Along with this crop insurance increase is a very important step as that shall be a a big relief for years of bad monsoon and we shall not witness farmers suicide which is painful for everyone of us.

While no one talks of 2 lacs insurance offered by PM by just paying Re 1 per day,It has huge benefits for families who are dependent on single person income and are left to mercy of others in event of death.

Increase in cheap loans to farmers and introducing more Mudra banks shall be a big relief in scenario where a poor farmer is cheated by money lenders taking loan of as high as 5% monthly which actually doubles in 19 months.

After reading above don't you feel our farmers deserved this much earlier but were denied by slow poison of subsidies which also remained 10% by the time it reached then as there were no bank accounts.

 Now let's applaud  our PM for Jan Dhan Yogna accounts and giving farmers there due status as they grow food for us.


The budget is expected to bring positive impact on job market as the focus on infrastructure and ease of doing business is aligned with the government’s vision of job creation.

The government promises to provide 1 crore affordable houses by 2019. Along with the same there is huge spending on infrastructure along with PPP model.
The budget unveiled a record 3.96 trillion rupees in spending to build and modernize railways,airports,roads and ports.

Now imagine the jobs created when there is so much spend on infra and housing. Even if you take 10 labours eemployed per house 10 crores get jobs only on housing promised by government. Now this is is a small portion of huge infrastructure budget. Imagine the requirement of engineers, Architects and labour. Not to forget huge benefits to ancillary industries like steel, cement, bricks.....and you can add many.

During all these years I also realised there was a huge mismatch between services available and skills available with people. How many times you felt you need a good plumber or electrician but had to wait for hours?

How many of us feel our kids have a talent in some special skill but we struggle to find right choice and end up with monotonous professions.

Vocational institutes and skill development has been given a big boost. government proposes to extend Pradhan Mantri Kaushal Kendras to more than 600 districts across the country, from 60 districts at present.
Moreover, 100 India International Skill Centres will be established across the country to offer advanced training and also courses in foreign languages. 
Subsidies are only short term solution. Job creation and growth is the need of the hour.
So now opposition leaders who might be looking for jobs in 2019 may be less worried.
Political parties taxation.
Election financing has been a consistent source of corruption in India. Nearly 70 percent of the 113 billion rupees in party funding over an 11-year period came from unknown sources, the Association for Democratic Reforms said in a report 
Now in this backdrop reducing the limit of cash donation to Rs 2000 from 20,000 is a big step. Many people still instead of applauding the step are going critical of this. One has to appreciate that the process started with big bang and this might go to zero in coming years.
Not to forget the bonds FM proposed Aim to clean up campaign financing. The bonds still to be implemented basically shall require the donor to issue bonds to political party through cheque. The party can encash the same only in their bank account within a stipulated time. If any party does not go by rule then income tax exemption shall go away. This ensures transparency at highest level.
Craig Jeffery, Australia said "To my knowledge, it’s completely unprecedented," 
So the anger of opposition parties who have been living lavishly in posh bunglows and buying votes with money and spending millions on campaigns is justified 
Real Estate

The budget proposed an
extension of an affordable housing program to five years and gives the sector infrastructure status. Property sales after two years will also now receive more favorable tax treatment, as opposed to a three-year
The base year for purpose of capital gain tax has also been changed to 2001 with index value 100
Now a person need not hold property for three years to avail LTCG but two years. Also as the inflation was highest from 2000 to 2016 change of base year shall reduce your capital gains easily by 20 % as indexed cost of purchase shall increase. I shall clarify that with simple example when new inflation index is available. But my estimate says huge tax saving. 
Also the same shall boost real estate sector as there shall be more transactions along with lower housing interest rates.
 So overall sunshine back on this dark side of economy for last two years. Opposition shall be able to buy cheap houses in 2019 
Along with budget allocation for modernisation of Railways and solar energy stations and many other reforms the biggest take away for me was listing of IRCON AND IRCTC on stock exchange.
When these companies listed on NSE the same shall be under scanner of SEBI and transparency available to shareholders by way of complete annual report, hence the accountability.
This can only and only be done by Mr Suresh Prabhu who is honest and shall not hesitate in giving details to the last Re spent. For me this is courageous and management at its best. Did any previous government dare to do this?
Now INC India and AAP can travel together in Indian railways post 2019 with safety in place 
FM is planning with Oil & Gas industry to merge giants like ONGC,BP,HP,GAIL,Indian oil as one entity which if happen shall be $105million company and 7th largest company in the world. Imagine the costs saved and increase in efficiency when drilling company to refinery to marketing is merged as one entity. 
Along with same he announced storage units to be made in Gujrat and Rajasthan .This was the need of the hour with so much uncertainity around crude oil prices.
So look forward to ache din for petrol and diesel.
Mr Arvind Kejriwal and Mr Rahul Gandhi,Reliance is missing above, Any comments?
The difference between total revenue and total expenditure of the government is termed as fiscal deficit. Fiscal deficit figure is most important and under the lens of rating agencies and FII. Fiscal prudence of 3.3% was highlight of the budget most applauded by foreign investors. 
When the crude oil was at all time low Government was very smart not to pass the entire benefits by way of subsidies and hence created huge buffer. This has now enabled the government to increase in spending as mentioned above and take economy to much higher growth.
As per head HSBC INC " Current Indian Government is most reform oriented and fiscal prudent in the world"
What is there more for common man in this?
As government borrowing was less by 75000 crores there is more room for corporate to raise the money in market and restart stalled projects. With banks getting recapitalized we shall see more and more projects coming up as liquidity increases .
With above figures one is sure of rate cut in forthcoming credit policy by RBI that shall help bonds to rally and investors make money.
The same shall increase profitability of companies.
Take an example with company having loan of  100 crores.with every 1% rate cut they save 1 crore rupee which gives them room for expansion and profitability goes up.
Thinking of stock market investment now? you must
Income Tax
  • If you earn between Rs 2.5 lakh and Rs 5 lakh annually 
  •  From 2017-18, you will have to pay 5 percent tax on your earnings, as compared to 10 percent earlier. This means your liability will either be zero (with rebate) or half of your existing liability.
  •  If you earn up to Rs 3 lakh, there will be zero tax liability
  •  If you earn between Rs 3 lakh and Rs 3.5 lakh, your tax liability will be Rs 2,500.
  •  If you earn up to Rs 4.5 lakh and invest the maximum of Rs 1.5 lakh under Section 80C, you will not have to pay tax.
  • The reduction in slab rate to 5 percent for Rs 2.5-5 lakhs is applicable to all resulting in tax saving of Rs 12,500 (for all slabs from Rs 5 lakh upwards. 
  • This is likely to boost consumption and put higher disposable income in the hands of taxpayers. This is important to boost growth, This extra 12500 in hands of every tax payer shall be used for consumer durables or travelling and hence boost growth
  • However If you earn between Rs 50 lakh and Rs 1 crore annually
  •  From now on, you will have to pay a surcharge of 10 percent over and above the 30 percent tax rate on your earnings. 
  •  The effective tax rate will be 34 percent for next year vs. 30.9 percent earlier for this income category. 
  • Starting next year, you will have to fill a simple one-page Income Tax Return form

MSME with a turnover of less than 50 crores shall now pay tax at the rate of 25% instead of 30% earlier. This figure is of significance as 96% of companies are covered under same. Now feel the extra money in their hand for expansion  
So Mr Rahul Gandhi callin it suit boot ki sarkar should eat his words back as it is extra tax on super rich and reduced burden on middle class.
  • Senior citizens who struggle after retirement are given a security of minimum 8% interest rate on their deposits in this falling rate scenario 
  • FIPB abolished shall help in ease of doing business for Foreign investors
  • Assessing officers to move more towards online communication with assessee and period of assessment reduced from 21 months to 18 months which shall  help less harassment in the hands of IT officers which is also one of the reasons for citizens nit filing tax returns
  • There was no mention of Indirect taxes which is a very positive signal that GST is on schedule and very soon ready to be rolled out. 
  • GST along with demonetisation and income tax reforms shall increase huge tax base and revenue for government.

Big disappointment for TMC, AAP. INC india who were calling demonetisation as biggest scam. 
Please stand up with two  minutes silence as a mark of condolence for them

My only disappointment with this budget is that it failed to address the  difficulties faced by startups and change of capital gain period of debt funds from three years to 1 or 2 year.
I sincerely hope FM shall look into my suggestions I wrote in my prevoius blog and consider them again as good ideas need to be carried forward and converted to startup and big business and not die under the load of red tapism and whims and fancy of bank managers
For me it was a budget i have never seen in years. There is hardly any negative unless one takes the lens of NASA to check few flip flops. 
I shall like to repeat what FM said beautifully in his speech mentioning end of corruption and support of demonetisation 
Nayi duniya hai, naya daur hai, nayi umang hai 
Kuchh the pehle ke tareeke, to hain kuchh aaj ke dhang 
Roshni aake andheron se jo takraegi 
Kaale dhan ko bhi badalna pada, aaj apna rang 


1 comment:

  1. m'am,

    did you have a chance to closely look at how effective are agri loans in India and how is their past performance in improving life of farmers and rural economy?

    just asking out of curiosity as huge 10 lac crs allocated for agri-loans