The Union Finance Minister Arun Jaitley yesterday presented the Union Budget of 2017. The budget was focused on 10 broad issues which were poor, health care, farmers, youth, rural population, financial sector, infrastructure, speedy accountability, prudent fiscal management, public services, and tax administration for the honest. This budget has been hailed as the budget of the poor and a complete package for all sectors.
The budget also indicated that the India’s ongoing war on cash will continue. The demonetization is supposed to create a transparent system of transactions and the ban on transaction of more than Rs 3 lakh cash will lead to less of corruption in cash management.
This budget does not seem to focus on any particular sector, society or populism. The Finance Minister Arun Jaitley has put a commendable effort to fulfill the shoes of PM Modi on the issue of Digitalisation, War on Cash and at the same time pro-poor approach. He has also put forward this budget in interesting times as the election season in about to begin in a few states of India.
As warned by many rating agencies and specifically by S&P, the fiscal deficit targets of India must not cross the 3-3.5% levels of GDP; Jaitley refrained from announcing big bang capital expenditure. He set out the 3.2% deficit target for current year and 3% for the next year. The tax benefits given in the budget are supposed to promote the private investments. Metro policy, Railway stations and IRCTC listing combined with concessions and bigger outlays to infrastructure and housing may lead to job creation for youth as well as huge investment.
With GST coming soon, Jaitley had very few shocks in this budget. The pain of demonetisation was enough for now, the GST may also bring out the unexpected pain for some section of businesses but the offering in the budget with regards to tax benefits may work as a balm for them. He did not shy away from mentioning the effect of protectionism on the export sector for India and offered full support as and when required.
The economic survey offered a great positivism for Jaitley going into the budget and he managed to reap the benefit from it.
The budget largely focused on the promotion of the digital economy, digital payments and rewards for honest taxpayers. This indicates Modi-Jaitley philosophy of less inconvenience for poor and honest. The election funding cap of maximum 2,000 cash deposit and at the same time mechanism of “electoral bonds” will bring transparency in the system. Swacch Bharat seems to have gone beyond the physical cleanliness to a moral requirement. The country needs a moral and systematic cleansing.
The warning to tax offenders was clear and strong. The numbers do not lie and we Indian are largely a non-tax compliant people.
It seems that both Modi and Jaitley are looking to give up the short term populist approach for exceptional long term gains.