Big-ticket infrastructure and rural spending push, boost to affordable housing, and a jaw-dropping credit line for farmers are some of the large takeaways of Union Budget 2017. The Finance Minister was straining to complete the formality in two hours, and could touch upon only the broad outlines of the financial statement, leaving the nitty-gritty to the annexure.
This year’s budget was a first in many ways. First, the budget presentation date was advanced by nearly a month. Second, the government clubbed plan and non-plan expenditure, and lastly, but not the least, the rail budget was subsumed under the Union Budget. The Finance Minister did not want to tinker with the indirect tax regime much. He left service tax, excise and customs duties untouched what with the proposed rollout of the Goods and Services Act in July.
But above all, the Union budget reeked of preparation by the government ahead of the polls in five states of the country, not least in the politically crucial Uttar Pradesh. The budget is replete with proposals that target voter groups strategically and projects the government as a pro-poor, pro-farmer, pro small business, pro-youth and anti-rich establishment.
A whopping 24 per cent increase in agricultural and rural spending at Rs1.87 lakh crore, Rs10 lakh crore credit linkage for farmers, giving infrastructure status to affordable housing, a five per cent cut in corporate tax for MSME sector and levying a 10 per cent surcharge on individuals earning over Rs50 lakh and up to Rs1 crore per annum and 15 per cent surcharge for people earning above Rs1 crore are sure signs of the government’s pro-poor, anti-rich spin.
Against his assertion last year that fiscal deficit for the year 2017-18 will be pared to three per cent of GDP, this year Jaitley overshot it by 0.2 per cent. This is the second time he has shifted the goalpost in four years. Last year, Jaitley had promised to cut corporate tax from 30 per cent to 25 per cent to make Indian companies globally competitive.
Last year, he reduced the rate to 29 per cent for select companies. This year, he has cut the rate for companies with a turnover of up to Rs50 crore. Although the move makes some sense, it is again a shifting of goalpost. Companies in this category were hit the hardest following the note ban.
As a bulk of their manpower came from states such as Uttar Pradesh and Uttarakhand, there were huge layoffs. Therefore, singling out MSMEs for tax benefits is an indirect way of benefiting youths who had lost jobs and can get it back. In a grandiloquent manner, the FM has tried to put a curb on funding of political parties by launching electoral bonds and reducing the maximum cash payout from a single source from Rs20,000 to a ridiculous Rs2,000.
Although the measure smacks of a holier-than-thou image of the saffron camp, in reality it will be a meaningless measure. It is a no-brainer that political parties can receive any amount and raise a commensurate number of bogus donors to account for the donations.
As another pre-poll measure to appeal to masses, the FM cut down the first slab of the interest rate from 10 per cent to five per cent, leaving the other two slabs untouched. This was a let-down for the large middle class population, not least the salaried class, who form the largest chunk of the voting class.
Post demonetisation, the least that people expected from this government was that they would get a substantial tax break. Their expectations were legitimate to a large extent as banks (read the government) mopped up huge liquidity and the government received windfall gains. However, this was not to be.
Taxing those earning over Rs50 lakh per annum by way of a surcharge of 10-15 per cent is a dead measure for the voting middle class and thus they will not be enthused by this anti-rich move. A Rs1 lakh crore railway safety fund, record allocation for MGNREGA, and an increase in allocations for national highways are some of the other measures that could endear the government to common people in these poll-bound states.
The budget has no big-bang announcements. Nor does it have a clear road map for the future. It was bland and tasteless for the middle class. Considering that the coming year will be the penultimate year for the government in which it may not be able to take tough economic measures to kick-start the economy, the FM has lost a chance.
