Union Budget 2016-2017: An ode to the common man

Finance minister bids to appease corporates with promise of financial sector reforms

Under opposition fire for being a 'pro-rich' government, India's finance minister Arun Jaitley on Monday presented a budget that was heavily tilted in favour of the farm and rural sectors.
Jaitley made record allocations of Rs2.75 trillion to the social (education and healthcare), rural and farm sectors. In contrast, he had little to offer India Inc or to the middle classes, though he promised to initiate financial sector reforms and managed to retain fiscal deficit targets.

"We believe in the principle that money with the government belongs to the people and we have the sacred responsibility to spend it prudently and wisely for the welfare of our people, especially the poor and the downtrodden," said Jaitley at the beginning of his speech.
Fortunately, it was not a 'tax-and-spend' budget, more of a 'spend' budget, with marginal increases in tax rates. While Jaitley gave relief to small taxpayers, he also enticed those who had dodged taxes in the past by offering minimal penalty, surcharge and immunity from prosecution for disclosing hidden assets.
And with India a signatory to the climate change agreement in Paris last year, the finance minister decided to burden the automobile and energy sectors with additional taxes. He imposed an 'infrastructure cess' of one per cent on small petrol, LPG and CNG cars and 2.5 per cent on diesel cars of certain capacity, and four per cent on higher engine capacity vehicles and SUVs.
Jaitley also relabelled the clean energy cess levied on coal, lignite and peat, renaming it the clean environment cess, and doubled it to Rs400 a tonne.
Defence spend
Surprisingly, the budget speech did not make any mention about defence allocations this year, except for a passing reference to the pension burden because of the implementation of the One Rank One Pension scheme.
The finance minister noted that the International Monetary Fund had hailed India as a "bright spot" amid a slowing global economy. The World Economic Forum had said that India's growth was "extraordinarily high".
"We accomplished this despite very unfavourable conditions and despite the fact that we inherited an economy of low growth, high inflation and zero investor confidence in the government's capability to govern," he remarked, taunting the Congress opposition in the Lok Sabha, the lower house of Parliament. "We converted these difficulties and challenges into opportunities."
But Jaitley warned that the risks of further global slowdown and turbulence are mounting. "This complicates the task of economic management for India. It has three serious implications for us," he noted.
First, India must strengthen its firewalls against these risks by ensuring macro-economic stability and prudent fiscal management. Second, since foreign markets are weak, the country must rely on domestic demand to ensure that growth does not slow down. 
And third, "we must continue with the pace of economic reforms and policy initiatives to change the lives of our people for the better," he declared.
Nine development pillars
Jaitley said his aim for the next year is to "transform India" and his proposals were built on this "transformative agenda" with nine pillars. They included: agriculture and farmers' welfare; rural sector; social sector, including healthcare; education, skills and job creation; infrastructure and investment; financial sector reforms; governance and ease of doing business; fiscal discipline; and tax reforms.
He said his tax proposals for the year also fell into nine categories. They included relief to small taxpayers; measures to boost growth and employment generation; to incentivise manufacturing; to move towards a pensioned society; promote affordable housing; reduce litigation and provide certainty in taxation; and use technology for creating accountability.
Jaitley also focused on the infrastructure sector and allocated Rs970 billion for the roads and highways sector. In 2015, India saw the highest number of new highways in terms of length and in 2016-17, the government will approve nearly 10,000 km of national highways, he said. He said the total outlay for the infrastructure sector was Rs2.21 trillion.
He also announced further reforms in the foreign direct investment (FDI) policy in the areas of insurance and pension, asset reconstruction companies and stock exchanges. Similarly, 100 per cent FDI would now be allowed in the marketing of food products manufactured in India, said the minister. 
Jaitley also came out with a series of measures aimed at financial sector reforms. It included the formulation of a bankruptcy code, deepening the corporate bond market and tackling of stressed assets of public sector banks.
NRIs have little cause for cheer
As in previous years, there was little to cheer for non resident Indians (NRIs) in the budget presented by finance minister Arun Jaitley on Monday.
The only relevant aspect related to tax deduction at source (TDS). Non-residents without PAN cards are currently subjected to a higher rate of TDS on their bank deposits.
The government now proposes to amend section 206AA of the Income-tax Act so as to provide that TDS will not be deducted at a higher rate in case NRIs furnish alternative documents.
Another minor change relates to Indians travelling abroad. The customs baggage rules for international passengers are being simplified so as to increase the free baggage allowance.
The filing of baggage declaration will be required only for those passengers who carry dutiable or prohibited goods.
- nithin@khaleejtimes.com

• India