New Delhi: Finance minister Arun Jaitley unveiled a budget for the poor on Monday, announcing new rural aid and health programmes in a strategy shift that could boost his ruling party in coming state elections.
Presenting his third budget, Jaitley described Asia’s third-largest economy as a bright spot in a gloomy landscape and reiterated a forecast that it would grow by 7.6% in the fiscal year that is drawing to a close.
But he said the government wanted to ensure that the benefits of growth were more widely shared among India’s 1.3 billion people.
“We have a shared responsibility to spend prudently and wisely for the people, especially for the poor and downtrodden,” the 63-year-old finance minister, who wore a powder-blue jacket, said in his opening remarks to lawmakers.
The spending package for 2016-17 from 1 April marks a radical shift from Prime Minister Narendra Modi’s initial focus on investing in infrastructure in a bid to kick-start private-sector investment that remains weak.
Jaitley described his three priorities as: strengthening India’s firewalls by ensuring macroeconomic stability and prudent fiscal management; driving growth through domestic demand; and reforms to boost economic opportunity.
Key areas of policy focus would be farming, social reforms, infrastructure and recapitalizing India’s banking system.
Modi’s landslide election victory in 2014 raised hopes he would draw a line under India’s socialist past, cut welfare and reduce the government’s role in business.
In its first two years in power, his government splurged on roads and railways at the expense of welfare programmes in the hope of creating economic stimulus.
Modi’s gamble was that infrastructure investment would yield dividends for the poor and the rural community. Four in 10 Indians rely directly on farming for their livelihoods, the government estimates.
Rising rural distress after back-to-back droughts and a recent heavy election defeat in a largely agricultural state have upset that calculus.
It has also left Modi’s nationalist ruling party open to attacks by the opposition, who use a Hindi phrase to deride Modi for leading a “suit and boot” government that only works in the interest of the rich.
Jaitley’s reeled off a list of $16 billion in measures targeted at the countryside, including spending on a job creation scheme, farmers’ welfare and building of rural roads.
He targeted a total of $130 billion in credit to farmers.
HERE ARE THE KEY ANNOUNCEMENTS
Rural development
— A total of Rs.38,500 crore allocated for MGNREGA; if implemented, this would be the highest ever annual spending on the scheme, says Jaitley
— Rs.9,000 crore allocated for Swachh Bharat Abhiyan
— Rs.2.87 trillion grants to gram panchayats and municipalities, a quantum jump of 228%
— A govt programme to be launched to provide LPG connections to BPL households; Rs.2,000 crore allocated to meet the initial cost of providing LPG connections in the name of woman of poor households
— Rs.19,000 crore allocated for Pradhan Mantri Gramin Sadak Yojana in 2016-17; in all, Rs.27,000 crore after state contribution
— Rs.87,765 crore allocated for rural development
— Govt to develop 300 ‘rurban’ clusters
— 5,542 of 18,542 unelectrified villages electrified; govt committed to achieving 100% electrification of villages by May 2018
Agriculture
— Target of agricultural credit raised to an all-time high of Rs.9 trillion
— Govt to set apart Rs.412 crore to encourage organic farming
— 28.5 lakh hectares will be brought under irrigation under irrigation under the Pradhan Mantri Krishi Sichai Yojana
— Five lakh acres of land to be brought under organic farming in three years under Krishi Vikas Yojana
— Rs.15,000 crore allocated for interest subvention for agri loans
— A dedicated irrigation fund worth Rs.20,000 crore to be set up under Nabard
— 89 irrigation projects to be fast-tracked
— Govt to spend Rs.850 crore in a few years on animal husbandry, cattle and livestock breeding
Health
— A new health protection scheme for health cover of up to Rs.1 lakh per family to be launched
— A national dialysis programme to be launched with funds to be made available through PPP plan. Jaitley proposes to exempt certain dialysis equipment from duties
— 3,500 medical stores will be opened under Pradhan Mantri Jan Aushodi Yojana to make quality medicine available
Infrastructure
— Allocates Rs.55,000 crore for roads and highways, excluding Rs15,000 crore NHAI bonds
— Nearly 85% of road projects languishing due to legacy factors at the beginning of the year have been put back on track
— Rs.3,000 crore earmarked for nuclear power generation
— Considering to incentivize gas production from deep sea, ultra deep water and high temperature areas:
— Proposes to develop 10 of the 25 non-functional air strips
Banking and finance
— Rs.25,000 crore allocated for recapitalization of public sector banks; banking stocks drop after the announcement
— The Banking Boards Bureau will be operationalised next fiscal year, says Jaitley
— Jaitley says govt will consider option of reducing stake below 50% in state-run banks in 2016-17
— RBI Act being amended to lay groundwork for monetary policy committee
— Sebi to develop new derivatives products as well as products for corporate bond market
— Target of disbursement under Mudra scheme increased to Rs.1.8 trillion
— Bankruptcy code for financial firms to be introduced in Parliament in 2016-17
Small taxpayers
— Budget to provide relief to small taxpayers through rebates
— HRA deduction under Section 80GG increased to Rs.60,000 per year from Rs.24,000
— First-time homebuyers to get additional deduction of Rs.50,000 on interest for loan up to Rs.35 lakh. Cost of house should not be more than Rs.50 lakh
— Tax ceiling raised from Rs.2,000 to Rs.5,000 for people with income below Rs.5 lakh per annum
— Pension withdrawal of up to 40% to be made tax-free at the time of retirement
— Presumptive income tax scheme to be extended to all professionals with income of Rs.50 lakh with a presumption of 50% profit
Policy
— Fiscal deficit target for FY17 retained at 3.5% of GDP and FY16 at 3.9%
— 15.3% increase seen in Plan expenditure to Rs.5.5 trillion, Non-plan expenditure at Rs.14.28 trillion in FY17
— Plan and non-Plan classification of budget will be done away with from 2017-18
— Revenue deficit seen at 2.5% for FY16 vs budgeted estimates of 2.8%
— Govt to allow 100% FDI through FIPB route in the marketing of food products produced and marketed in India
Taxes
— Jaitley to raise excise duty on most tobacco products except beedis by 10-15%
— Additional 1% tax on sale of luxury cars costing more than Rs.10 lakh
— Finance minister announces infrastructure cess on cars
— Krishi Kalyan Cess of 0.5% on all taxable services
— Excise duty on branded ready-made garments
— Service tax to be exempted on general insurance schemes under Nirmaya Scheme
— Krishi Kalyan Cess of 0.5% on all taxable services
— Service tax on single premium annuity to be reduced to 1.5% from 3.5%
— Service tax exempted for construction of houses less than 60 sq. metres
— DDT exempted from REITs
Companies
— Govt to amend the Companies Act; registration of companies to be done in a day
— New manufacturing companies incorporated after March 2016 will be given option of being taxed at 25% plus cess plus surcharges
— Start-ups to get 100% tax exemption for three years except MAT which will apply from April 2016-2019 for creation of jobs
— Stand-Up India scheme allocates Rs.500 crore for SC, ST and women entrepreneurs—two projects to be promoted per bank branch per category
Disinvestment
— FY17 disinvestment target at Rs36,000 crore, startegic stake sale seen at Rs20,500 crore
— To encourage central public enterprises to divest own assets for raising resources for new projects
— Department of disinvestment to be renamed as Department of Investment and Public Asset Management
Dispute resolution on retrospective taxes
— Arun Jaitley introduces one-time dispute resolution scheme for retro tax cases; payment of tax arrears to lead to waiving of penalty and interest
— Jaitley says levying heavy penalty for non-payment of tax has led to high litigation. Proposes to modify penalties schemes.
— India will not resort to retrospective taxation in future: Arun Jaitley
Black money
— Jaitley proposes limited compliance window on undeclared income of domestic taxpayers
— Limited tax compliance window from 1 June to 30 September for declaring undisclosed income at 45% including surcharge and penalties
— Long-term capital gains period for unlisted companies to be reduced from three to two years
Education
— Govt to spend Rs.1,700 crore to set up 1,500 multi-skill training institutes
— Govt to create digital depository for school-leaving certificates
— Rs.1,000 crore set aside for higher education financing
— Jaitley says govt aims to skill 10 million youth in the next three years under the PM Kaushal Vikas Yojana
— Digital literacy scheme to be launched to cover 60 million additional rural households