The Union Budget 2017-18 assumed more importance than a conventional Budget because of the extraordinary environment in which it was being presented. The economy, still in a recovery mode after the demonetisation step, needed a Budget to sharply boost growth and prop up consumption. The finance minister has more than made a match of these expectations.
The commitment to limit the fiscal deficit to 3.2% of GDP in 2017-18 is commendable. Particularly so in view of the fact that Jaitley has achieved this despite providing a significant boost to spending in infrastructure, agriculture and rural development. By committing to a deficit target of 3% next year, he has highlighted a clear intent to stick to the long-term FRBM goal. Sharp increase in infra investment to R3.96 lakh crore was a much-needed step to revive the economy and boost job creation. Expansion of agricultural credit target to R10 lakh crore will not just help boost agricultural production, but significantly enhance farmers’ income. The focus on housing is another distinctive feature of the Budget, which is certain to energise the sector.
Although by keeping the overall corporate tax rate unchanged, the finance minister may have dampened the spirit of large corporates a bit, but he has extended a fair amount of relief to the MSME sector by reducing income-tax rate to 25% for companies with annual turnover of up to R50 crore. Reduction in individual income-tax rate in the slab of R2.5-5 lakh to 5% from 10% has addressed a long-standing demand from the middle-class taxpayers and will aid consumption in the economy. The
R10,000-crore allocation for the national broadband project, BharatNet, from the available USOF proceeds should speed up broadband roll out to help bridge the digital divide. The finance minister could, however, have used the opportunity to clear the air on levy of service tax on spectrum payments, a long-standing demand from telecom operators.
The Budget particularly stands out for its initiatives to speed up our progress towards a digital and cleaner economy. By limiting cash donations from individuals to political parties at R2,000, Jaitley has signalled the government’s resolute will to deal with one of the most controversial aspects of political funding in India. The Budget has hinted at further liberalisation of the FDI regime and abolition of the FIPB in 2017-18. This gives out a clear signal of welcoming foreign investors.
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The Budget is unique for two reasons: advancement of the date to February 1 and clubbing of the Rail Budget and the General Budget—both initiatives driven by strong rationales. But it will also be remembered in the future for the clear-headed thinking that guided the proposals and the extraordinary environment in which it was ushered in.
By Rajan Bharti Mittal, Vice-Chairman, Bharti Enterprises