Finance Minister Arun Jaitley presented a budget that appeared to be a salve for the tribulations of demonetisation: He hiked outlays for the world’s largest employment generation scheme, increased the target for agriculture credit in an attempt to reduce poverty in rural India and offered tax benefits to small and medium enterprises and salaried Indians.
Jaitley also began the process of reforms in political party funding–something Prime Minister Narendra Modi alluded to in his December 31, 2016 speech. Under the proposed reform, anonymous cash donations to political parties have been capped at Rs 2,000, down 90% from the existing Rs 20,000.
“The budget is a step for strengthening the economy, improving farmers income and bettering the quality of life of citizens,” Modi said immediately after the Budget speech
The government reduced the personal income tax rate for the slab of Rs 2.5-5 lakh from 10% to 5%, with an additional rebate of Rs 2,500 for those with income below Rs 350,000. The FM has also announced a benefit of Rs 12,500 for individual taxpayers who earn more than Rs 5 lakh per annum.
In effect, an individual with income of Rs 300,000 will not have to pay any income tax, and an individual with an income of Rs 450,000, who declares deductions under existing income tax laws–such as savings, rent, asset repayment, etc–of Rs 150,000 will also not have to pay any income tax.
Corporate tax rate for small companies with turnover less than Rs 50 crore has been reduced from 30% to 25%. About 96% of India’s companies will benefit from this step, the finance minister said.
A consecutive rural focussed budget
The allocation for rural, agriculture and allied sectors in 2017-18 is Rs 1,87,223 crore–24% higher than the previous year, Jaitley said.
Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which assures 100 days of employment for job seekers per year, has seen an increased outlay of Rs 48,000 crore–the highest ever–in 2017-18 from Rs 38,500 crore allocated in 2016-17, up 25%. If we take into account Rs 9,000 crore added as supplementary grants towards MGNREGA during 2016-17, the rise in funding is just 1%.
The Antyodaya Yojana has been set a target of getting 10 million rural households out of poverty and making 50,000 gram panchayats poverty-free by 2019.
Agricultural credit target has been increased to Rs 10 lakh crore for the next financial year, in a move to meet the government’s commitment of doubling farmers income in five years.
The FM also spoke about the benefits of demonetisation, and added that impact on the economy would be transient, and the gross domestic product (GDP) would be bigger, cleaner and real in the coming years.
Jaitley also listed out some details about bank deposits post-demonetisation: Over 10 million accounts saw deposits between Rs 200,000 and Rs 80 lakh (with an average deposit of Rs 503,000) and about 148,000 accounts saw deposits above Rs 80 lakh with average deposit of Rs 3.3 crore.
Presenting the first combined budget (including Railways Budget) since 1924, the Finance Minister has allocated Rs 55,000 crore from the budget for capital expenditure on railways, of a projected expenditure of Rs 1.31 lakh crore.
While the total expenditure for 2017-18 has been budgeted at Rs 21,47,0000 crore, capital expenditure would be increased by 25%, Jaitley said. The Centre will transfer Rs 4.1 lakh crore to states and union territories.
The government is also expected to borrow less at Rs 3.48 lakh crore as against Rs 4.25 lakh crore last year.