Iss mod pe ghabra ke na tham jaiye 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
RURAL SECTOR AND FARMERS
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.
YOUTH AND JOBS
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.
- 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
- 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.