Budget 2017 – When Finance and Poetry Collide

Yet another finance budget (2017-18) has been delivered by the Hon’ minister for Finance amidst the initial disarray of the session, around the sad demise of Sri. E. Ahmed (sitting representative of the Malappuram constituency of Kerala).

Nonetheless our finance minister delivered the government’s budget in his speech spanning an hour and 50 minutes. As is his panache, the budget lay peppered with poetry and quotes; both flowed with equal charisma.

Is mod par ghabra ke na dham jaayiye aap
Jo baat nayi hai usse apnayiye aap
Darte hai nayi raah pe kyu chalne se
Hum aage aage chalte hai, aayiye aap
-Finance Minister

Income Tax

A prominent feature of the budget is it’s impact on income tax. For those in the early stages of their career and those earning less than ₹5 Lacs, this comes as a blessing. Furthermore, those earning up to ₹4.5 Lacs will have zero tax if they make use of the entire ₹1.5Lacs as investments under Sec. 80C. Another great proposal concerns the filing of your IT returns. This will now be a single page simple affair; for income up to ₹5L.

budget_1
* Without deductions/ exemptions |10% surcharge on income between ₹50L – 1Cr. Data taken from Walnut app.

What this has done additionally is really encouraged more people to fall into the tax purview. Through an assortment of deductions and exemptions, the budget has extended the basis to include everyone for a comprehensive tax profile of Indian citizens.

The budget has done a good job in maintaining the fiscal deficit at a reasonable figure- 3.2% of GDP; without ignoring the allocations for infrastructure and rural growth.

Highlights

There were 3 major highlights to this year’s budget.

  • The date of the budget has been advanced to 1st Feb
  • Railway budget has been merged with the General Budget
  • End to the ‘plan’ and ‘non-plan’ classification of expenditure.

The emphasis of the budget and the vision for next year revolved around 3 key elements Transform, Energize and Clean India- TEC India. To nurture this vision, the budget covered a broad spectrum under 10 distinct themes.

  • Farmers
  • Rural Population
  • Youth
  • Poor & Underprivileged
  • Infrastructure
  • Financial Sector
  • Digital Economy
  • Public Service
  • Prudent Fiscal Management and
  • Tax Administration

The agricultural credit has been fixed at ₹10 lakh crore and is the record highest till date. Access to credit is always a concern and this measure should help farmers in planning their crop. There is also an additional 60 day interest waiver for farmers. The budget aims to make 50,000 gram Panchayat poverty free and complete 1 crore houses for the homeless by 2019. By May 2018, India will have achieved 100% electrification of all her villages.

Under youth and education, there is a proposal to create a national testing agency that will monitor all the entrance tests in the country. SWAYAM is an online learning portal, which together with the digital India initiative will host over 350 courses; and will help students leverage high quality academic content.

The total budget for transportation is set at ₹2,41,387 crore of which the railways get ₹1,31,000 crore. Cashless reservations on the railway booking platforms have gone up from 58% to 68% over the last year. As you can see, digital infrastructure is taking a center stage in government initiatives. A highly ambitious plan has been proposed to connect more than 1,50,000 gram panchayats with high speed fiber optic internet. A total of ₹3,96,135 has been allocated for infrastructure.
The BharatNet project has been tasked with the burden of providing broadband connectivity to all parts of India. A total of 1,55,000 kms of Optical Fiber Cables have been laid so far. This budget stepped up the allocation for BharatNet to ₹10,000 crores.

This budget gives thrust to stimulate growth | provide relief to the middle class | affordable housing | curb black money | promote digital economy | create transparency in political funding and simplify tax administration.

budget-2017

Small and Medium Businesses

This year’s budget has taken great care to ensure that the benefits reach the small and medium sections of the economy individuals as well as companies. Small companies with annual turnover of less than ₹50 crore will now be taxed at 25% as against 30% earlier. This will make the MSMEs more desirable and competitive than their bigger counterparts; as well as encourage small businesses to shift to a company format.

budget_glance

*All amounts are in ₹ crore. Left side indicates expenditure and right side indicates revenue. Data taken from supporting documents to the budget.

Digital India

It is prudent to talk about the budget alongside the impact of demonetization and digital India. The budget itself focuses on curbing black money, promoting digital India and transparency of political funding.

Analysis of post demonetisation data showed that 1.09 crore accounts received deposits ranging between ₹2 lakh and ₹80 lakh. The average deposit size was ₹5 lakh.

Post demonetisation, there have been proposals that no transactions above ₹3 Lakh shall be permitted in cash. In an effort to promote cashless transactions, all excise duty on POS card readers, m-POS, fingerprint readers and iris scanners have been exempted.

In the days after it’s launch the BHIM app has registered over 125 lakh users and is changing the face of payments already. To promote its usage the government will launch two schemes.

  • Referral bonus for individuals and
  • Cash-back scheme for merchants who use it.

Aadhar pay is another initiative that will receive attention under this budget. This merchant version of the aadhar enabled payment system will be launched shortly and will help those who do not have credit/ debit cards and mobile wallets. In unison with biometric scanners and aadhar verification, soon we can make payments at the touch of a finger, literally.

Plausible Impacts

On the back of demonetization, two things were evident. 1- Firmer measures were required to curb black money. 2- A robust platform had to be in place to foster cashless transactions.

Nayi duniya hai, naya daur hai, nayi hai umang
Kuch thhe pehle ke tareeke, toh hai kuch aaj ke dang
Roshni aake andheron se jo takraayi hai
Kaale dhan ko bhi badalna pada, aaj apna rang
-Finance Minister

This year’s budget has laid down some pretty stern rules when it comes to transacting in cash and on the maximum donation that a political party can receive from one person. This has been pegged at ₹2,000.

The difficulties resulting from the cash crunch during the last month of 2016 was clear sign that we were lacking a robust platform that would support cashless transactions. As a result, this budget has set aside a good sum for realising that goal. With focus on bringing internet connectivity and electricity to all parts of India- the dream of a digital economy is not far behind.

On the infrastructure and rural development front, a lot of measures have been proposed to uplift, digitise, modernise and educate the rural sections of the economy. Over the course of the term, we can expect to see internet being an integral component of all villages in India.

When combined together, these components which are mainly – electrification of villages, digitisation, internet connectivity, online education portals, credit to farmers and interest cushions will give a tremendous boost to the rural economy.

Foreign investment policies have gained from healthy reforms over the last term and this budget has left much of these changes untouched with further scope for FDI liberalisation under consideration.

Riding on the back of demonetisation is the growth of cashless transactions in India and the channelling of savings into the banking system. As a result availability of credit at lower cost and increased private investments are few of the bright prospects.

The government’s trump card- Jan Dhan, Aadhar and Mobile number (the JAM trinity) has received special focus in this budget. This trinity might well be the afterburners that thrust our nation forward as a digital supremacy.

Random Facts

Just for the heck of it, let’s go back in time and see what the union budget of 1947-48 looked like. Below is a table for comparison.

budget_2

It’s good to know how far we have come as a nation. Back then the fiscal deficit was much higher than what it is right now. Add to that the cost of the partition and things were in pretty bad shape back then. But we survived and grew exponentially- all the way, even to Mars. Mangalyaan, you rock! Well, you landed on that piece of rock to be more precise.

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