Union Budget 2016-2017

The Finance Minister summed up his third budgetwiththreeli6lewordsthatreflectbig:Desire,Dream& Vision; his desire to provide socio-economicsecurity to every Indian, his dream for a prosperousnaDonandhisvisiontotransformIndia.MrJaitleyhasdescribedhis threeprioriDesas strengthening India'sfirewalls by ensuring macroeconomic stability andprudent fiscal management; driving growth throughdomesDc demand; and economic reforms and policyiniDaDvestochangelivesforthebe6er.

This Budget has an overarching focus on improvingagriculture,andscalinginfrastructure,withmeasuredfocus on social sector reforms and recapitalisingIndia'sbankingsystem;allofwhichbodewellforthecountry.

But rising rural distress aKer back-to-back droughtsand a recent heavy elecDon defeat in a largelyagricultural state have upset the math from thepreviousbudgetcalculaDons,especiallygiventhefactthat four out of every 10 people rely directly onfarming for their livelihoods. Thus, Agriculture hastopped the FM’s list of prioriDes – while Rs 35,984crore has been allocated for agriculture in the nextfiscal, the outlay under the MGNREGA programmewas being enhanced to Rs 38,500 crore in a bid tothink beyond food security and move to incomesecurity.

InfrastructuregotahugepushwithanallocaDonofRs2.19 lakh crore for road and rail sector. There’s alsogreat news for rural electrificaDon -- 100% ruralelectrificaDonisexpectedbyMay1,2018.

ConDnuing government efforts to dealwith the highlevels of NPAs or bad debts, of state-run banks, theBudgethasallocatedRs25,000croreforrecapitalisingpublic sectorbanks.ThemarketswereexpecDngthisamounttobehigher.

Several incenDveshavebeenprovided for thehealthsector.TheFMislookingatmakingqualitymedicinesavailableataffordablepricesbyopening3000genericdrugs stores to reinvigorate supply in 2016-17. The‘NaDonalDialysisServicesProgramme’–aPPPunderthe NaDonal Health Mission -- will not only benefitpeoplewith renal problemsbutwill also provide taxincenDvestoprivateplayersinthehealthsector.

A new health protecDon schemewill provide healthcover up to INR 1 lakh per BPL family. For seniorciDzensanaddiDonaltop-uppackageupto30,000willbeprovided.

As promised, start-ups have been given a three-yeartax holiday and capital gains exempDon, and theGovernment will introduce a bill to amend theCompaniesAct,2013inthecurrentBudgetSessionoftheParliament thatwouldalso improve theenablingenvironmentforstart-ups.

Because innovaDon provides thrust to economicgrowth,theFMhasproposedaspecialpatentregimewith 10% rate of tax on income from worldwideexploitaDon of patents developed and registered inIndia. IncenDves will be also provided to promoteentrepreneurshipamongSC/STs.

What comes as a surprise factor was the parDaltaxaDon of EPF and PPF. This will reduce pensionmoney significantly when it is withdraw onreDrement.UnDlnowtherewasnotaxoninvestment,oninterestaccruedandonwithdrawalonEPF.

The third budget ofMr. Jaitley is rightly focussed onrural development. Given the global turbulence andthe fact that demand has unDl now been createdwithin the country, abudget focusingon ruralneedswillfurtherspureconomicacDvityandgrowth.Butastrading came to a close today, the Sensex finallyse6led at 23,002 points, down 152 points from thepreviousday’scloseaKerfluctuaDngthroughtheday.

We now have to wait and watch how industry andmarkets react to this Budget as it pans out in thecomingfiscal.WelivewithhopethatthisBudgetwillpromptgrowthanddevelopmentastheFMpracDcesfiscaldiscipline.

MedhaGirotraPublicAffairsPracDceLead

PILLARSFORREFORMINGINDIA

Whatareyourini;alreac;onstoFinanceMinisterArunJaitely’s2016-2017Budgetspeech?MyfirstreacDonisthatitisquiteapredictablebudget.Itwasexpectedthatthegovernmentwillgiveareemphasisoninfrastructure,whichithasdone.Thereissomeuncertaintyaboutwhetheritwouldreduceorbridgethetargetonthefiscaldeficit.Thefinanceministermaintainedthattarget,howeverhehasalsoannouncedthatheisgoingtosetupareviewmechanismorcommi6eetolookintothewholeFiscalResponsibilityandBudgetManagement(FRBM)systembecauseinmanywaysitisquitelong.

Whatareyourthoughtsontheannouncementsintheagriculturesector?Itiscertainlyforwardlookingbudgetinthissector.Usually,inthebudgetthegovernmentalwaysemphasisesonwhatlooksgood.Inthatsense,thereisasignificantthrustontheagriculturesector.Withsomuchtalkaboutthetreatmentoffarmersandfarmerdistress,Ithinkit’sagoodathingtogiveemphasiseonthesector.However,Iwouldn’tholdmybreathabouthowmuchofthisispossibleinoneyear.Inmyviewoneofthebestthingstobeannouncedisthecropinsuranceschemeforfarmers.

BasedonwhattheHon’bleFinanceMinisterspokeonthefloorofthehouse,howdoyouseetheimplica;onsfromimplementa;onof7thpaycommissionandOROPplayout?AsfarasOROPisconcerned,Ithinkthegovernmenthasalreadyadoptedthatandsetouttheplan.Onthe7thpaycommissiontheFinanceMinisterhasdeclaredthathehasmadeaninterimprovisionsothatitwilltakecareoftheburdenofthisfinancialyear.However,bothOROPandthe7thpaycommissionhasmanyimplicaDonsbeyondthecomingfinancialyear.Italsodependsonwhenthe7thpaycommissionrecommendaDonsbegin

togetimplemented.SoIthinkwearecoveredforthisyear,buttheimplicaDonsfurtherdownthelineareyettobeworkedout.Therehavebeenaslewofmeasureswhichhavebeenannounced,whichincludetaxsopsforsmallbusinesses,theincreaseofthecapfrom1croreto2crore.

DoyouthinkthisisanentrepreneurfriendlyBudget,andinwhatway?Yes,Ithinktheincreasefrom1croreto2crore,provisionsforscheduledcastesandtribetobecomeentrepreneurs,areallposiDvesteps.Itisclearlyanentrepreneurfriendlybudget.Howitwilltranslateintoresultsongroundisyettobeseem.Itisimportanttorememberthatthebudgetisjustanannouncement,itneedstobetranslatedintoactualacDon.WhatisinitforCorporateIndia?VeryoKentherearesmallthingsthatneedtobedonethatdonotleadtobignewsbutcanbequiteimportant.Forinstance,anITplapormormakingprocessestransparent.ThereareseveralsuchsmallthingsthathavebeenannouncedthoughthereisnobigDcketannouncementonthecorporatetaxesside.Iwouldagreethattherehasnotbeengreatexcitementonthesideofthecorporates,asfarasthetaxsopsareconcerned.ButtheimportantthingfromtheirperspecDve,istheseqngupofanAssetReconstrucDonCorporaDonforwhichtheyhavesetasidethemoneytorecapitalisethebank,orcleanuptheirbalancesheets.That’sverysignificant.Doyouthinkthestepsannouncedfortherecalibra;onofbankingsector?Publicsectorbankshavedonealotofimprudentlending,withpeoplewhodon’tpaybackthemoneythattheyhaveborrowed.Thisiswhatputsthebanksandthebalancesheetunderthepressure.UnDlthisgetscleanedupinthebalancesheets,thebankscannotdofreshlending.

WhattheFinanceMinisterhasannouncedisthatthosewhoareholdingallthesenon-performingloans,theywillbehandedofftoaseparateAssetsReconstrucDonCompanyorwhatisoKencalledabadbank,becauseittakesonallthebadassets.Itwillensurethatthebalancesheetsgetcleanedup,andthebankscanrestarttheirlendingoperaDons.WhereastheAssetReconstrucDonCompanywilltryseparatelytorecoversomeofthoseloans,withoutinanywayimpairingthefuncDoningofthebank.IwouldsaythisisoneoftheveryimportantmoveswhichtheFinanceMinisterhasmadetoday.OneofthepillarstheFinanceMinisterfocusedonwasEduca;on,SkillingIndiaandJobcrea;on.Doyouseethisposi;velycontribu;ngtoIndia’sgrowth?IthinkthisisanothergoodmoveinthatdirecDon,someoftheseitemsaregoodinthemselves.ButtheimportantquesDonisthescaling.AreyoupuqngenoughmoneybehindtheseschemesorisitjustatokenallocaDon?MyconcernwiththeskillingIndiaprogrammeisitisagoodthingtodo,butareyoudoingitonasufficientenoughscaletoreallymakeadifferencetotheemploymentmarketforproducDveskilledlabour.Thereisfoodforthoughthere.Ifwecomparethisbudgettolastyear,doyouthinkthegovernmenthasprogressed?Thegovernmenthasdefinitelytriedtomakeprogressalongthelinesthathadbeenindicatedlastyear.Themainfeaturesaretopushinfrastructureinvestment,tryandmaintainfiscalprudencewithoutraisingthedeficittoomuch,alsoonthetaxproposalsidewherethegovernmentsaidtheywillreducecorporatetaxalongwithreducDonofexempDons,sothosethingshavelargelybeendone.

11:04AMBeginningofbudgetspeech

BSESENSEX 23,127.5712:44PM Endof

budgetspeechBSESENSEX 22,966.34

SudiptoMundleEmeritusProfessor,

NaDonalInsDtuteofPublicFinanceAndPolicy

AnautonomousresearchinsDtuteunderMinistryofFinance

ECONOMISTVIEW

Government’s

focuswillbeon

ensuringmacro-economicstabilityandboosDng

domesDcdemandbesidesconDnuing

thepaceofeconomicreforms.Ithasalsovowedtoprovideprudentfiscal

management.Onabroadlevel,the

focusoninfrastructureseemsright,as

itwillcertainlyhelpconnectthecountry

be6erthereby

providingbe6eropportuniDesto

expandanddeepen

thedomesDcmarket.

GiventhecondiDonof

internaDonalmarkets

itwouldbewisetofocusandbuildthe

largeopportunitythat

isavailableinIndia.

Thefocusonagricultureandthe

openingupofforeigndirectinvestment(FDI)throughtheFIPBroutefor

markeDngfoodproductsproducedand

marketedinIndiacanalsoboostthe

agriculturalsector.InteresDngly,thegovernmentdidnotwaitDllthefourth

yearofcomingtopowertofocusonissuesthatnormallyseebenefitscloser

totheelecDonyear.Eightschemes

havebeenintroducedfortheagriculturesector-thePradhanMantriKrishiSinchaiYojana,ParmparagatKrishiVikasYojana,OrganicValueChainDevelopmentinNorthEastRegion,

UnifiedAgriculturalMarkeDng

ePlaporm,PashudhanSanjivini,NakulSwasthyaPatra,E-PashudhanHaatandNaDonalGenomicCentreFor

Indigenousbreeds.Theseshouldgiveagoodboostto

theruraleconomy.

TheFinanceMinisteralso

focusedontheissueof

governanceandeaseof

doingbusinessandimportantlyconsDtuteda

TaskForceforraDonalizaDon

ofhumanresourcesinvariousministries.OntheMakeinIndiafront

theBudgethastriedtomakea

contribuDontochangecustomsandexcisedutytoimprovecompeDDveness

insectorsrangingfrominformaDonand

technologyhardwaretocapitalgoods,

defenceproducDon,texDles,chemicalsandpetrochemicalstoaircraKandship

repair.TaxeshavealsobeensimplifiedandraDonalizedtomakeiteasyfor

doingbusinessinIndia.

Thefrailtyoftaxregimethatthe

corporatesectorhasbeenpoinDngto

alsoreceivedmenDonwiththefinanceministercommiqngtoastableand

predictabletaxaDonregime.Companies

willnowhopethattheMinisterandhis

officialswillremaincommi6edtothiscause.Overall,itisaBudgetthatis

morefocusedonmacroissuesrather

thanonspecificsectors.Thisshouldprovidetherightkindofenvironment

forbuildingstrongconnecDvityand

boosDngproducDvitybothatthefarmandindustrylevel.Thisalsoinaway

addressesthecriDcismthattheBJPis

interestedincorporatewelfareover

farmwelfare.

TheNaDonalDemocraDcAlliance

governmentseemstobelookingtousetheBudgettoboostgrowthbygiving

theruralandinvestmentsectorsabig

push.However,themostimportanttaskforthegovernmentwillbeto

maintainfiscalprudencewhen

spendingforgrowth.

The “Transform India” Union Budget presented by

Finance Minister, Mr. Arun Jaitley, in Parliament today seems balanced at first look and hopefully will have no

devil in the details.

TSVishwanathSeniorPolicyAdvisor,

EdelmanIndia

Non-TaxRevenueINR1,81,561

crore

RevenueReceiptsINR8,03,808

crore

CapitalReceiptsINR5,10,189

crore

Withapro-smallbusiness,pro-agriculturebudget,theimpactofthisBudgetwillcertainlynotbevisiblequickly.ThewayIseeit,thisbudgetisabouttryingtomakealongtermimpact.Iftheapproachworks,thentheimprovementsmaybemorebroad-basedandhaveabiggerimpactonthejobsfrontandhenceboostdemand.

TheGovernment’scommitmenttosLcktothe3.5%fiscaldeficitisgoodbutitsrelianceonsomewhatuncertainrevenuesourcessuggeststhattheactualfiguresmaywellbedifferentfromthebudgetesLmates.Alsointhelongrun,aSemptstowardsbringingmoreflexibilitytotheFRBMmaycreateitsownissues.ThereabrightspotsuchasiniLaLvesonbroadeningofagriculturalprocurementanddevelopingSC/STentrepreneurs’hubs.AlsowelcomeistheannouncementofstepstowardsdevelopingguidelinesforPPPresoluLonsuchasthePublicULlity(ResoluLonofDisputes)BillandguidelinesforrenegoLaLonofPPPConcessionAgreements.Someofthetaxreformsandfinancialsectorchangesmayhavesalutaryeffectsaswell.SomeofthefinancialsectorchangeslikebroadeningtheSecuriLesAppellateTribunal(SAT)andempoweringAssetReconstrucLonCompanies(ARCs)maypromotebusinessinthelongrun.However,thesestepsareunlikelytogetmuchacLongoingonthe“MakeinIndia”frontatleastintheimmediaterun.TheotherthingwhichisquiteinteresLng,Idon’tknowifit’sposiLveornegaLve,istaxcollecLonresearch.

Dr.RajeshChakrabar;ExecuDveVicePresident

ResearchandPolicy

WadhwaniFoundaDon

POLICYEXPERTS’VIEWS

Infrastructure

Socialsector,education,health

Roads,inclPMGSY

Ruralsector

Ruralemployment (MGNREGS)

AgricultureandFarmers’welfare

RecapitalisationofPublicSectorBanks

PradhanMantriGramSadakYojana(PMGSY)

PrimeMinisterFasalBimaYojana

Skilldevelopment

2,21,246

1,51,581

97,000

87,765

38,500

35,984

25,000

19,000

5,500

1,804

Majorallocations forFY17(INRcrore)

PlanExpenditure +

NonPlanExpenditure = TOTAL

INR3,45,978Cr INR9,68,019Cr INR13,13,997Cr

SNAPSHOT

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