budget 2017


Widely seen as an optimistic panacea to the aftermath of demonetisation and the precursor to the GST Bill coming in July this year, we analyse what all Mr. Arun Jaitley’s attaché case has in store for the nation.  We will also tell what the student community can take away from the Budget.


On the 1st of February this year, the world watched as the 2nd fastest growing economy of the world came with its economic report card for the previous financial year and its economic aspirations, hence the resource allocation for the next term. In every way a far lesser populist with more fundamental and less big-ticket reforms, long term results driven, this minimalist and fiscally prudent budget can well be seen as being the better one of the NDA regime. Finance supremo Jaitley has presented this fourth budget with acute attention on distinct areas concerning, inter alia, agriculture, rural India, infrastructure, education, youth and, most importantly, digital economy.

On the face of it, Budget 2017 is aimed to the reduction of tax burden on the endangered section of the population and aims at more wealth creation from the richer section of the society, given the expectations of higher tax compliance post demonetisation. With the deduction in tax rate of the Rs. 2,50,000 – 5,00,000 income category from 10% to 5%, the purchasing power of the lower middle class is bound to increase, mitigating the pains of the class worst hit by demonetisation. The fiscal deficit, which is the difference between the total revenue and the total expenditure of the government, is projected to come down to 3.2%, much in compliance to the 3%, as laid down in the economic survey of India. Pushing forward to its commitment to digital economy, a mission has been set up with a target of 2,500 crore digital transactions for 2017-18 through UPI, USSD, Aadhaar Pay, IMPS and debit cards. The fund for NABARD (Rs. 35k crore) and MNREGA (Rs. 48k crore) has been increased, further making room for direct investment in agriculture and dairy giving a much needed impetus to the rural development. Affordable housing is the cherry on the cake as the government has granted it an infrastructure status, thereby enabling housing developers to avail benefits granted to infrastructure sector, along with tax relaxation and other incentives.

On the objective side of things, the prices of generic medicines, railways tickets among other things will be slashed. Cost of undergoing non-residential courses at IIM’s is set to become cheaper to an extent after the proposed exemption of service tax. Prices of mobile-phones, in lieu of the hike of the price of circuit boards, currently unavailable indigenously, and tobacco products are slated to increase.

Fuelled by the reduction in income tax rates for smaller companies with annual turnover up to INR 50 crore from 30% to 25% and hence granting more flexibility on loss carry forward and liberalisation of tax holiday regime for start-ups, announcements of further liberalisation and abolition of Foreign Investment Promotion Board to increase FDI and ease of doing business, extension of the sunset clause of the 5% concession tax rate on qualifying foreign debt from June 2017 to June 2020 and the extension of profit-linked deductions to 3 out of 7 years and timeline to claim MAT credit to 15 years, government has made its intention clear that more start- ups shall mean more efficient employment.

Criticisms also surrounded the budget citing the less capital allotment to education, healthcare and PSUs. Sure, capital investment has always been considered extremely important for the long-run growth of any modern economy. But current capacity utilization across sectors in India is around 67%. This means that there is substantial spare capacity and any move to artificially force investments into the system will lead to the kind of capital inefficiency that has brought China to its knees. Of course, as per the budget, overall capital expenditure is up 25.4% but most of that should be on infrastructure to support the theme of bringing the markets to the under-served.

With its agenda of Transform, Energise and Clean India and thrashing the Universal Basic Income, a message resounding clear is that this government has no plans of distributing freebies and unearned largesse. As the government paves way to the minimisation of its role in the economy, it consolidates its vision of a different route to development, not doles and all-appeasing benevolence.

Image credits- Businesstoday.in

Nikhil Kumar

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