Union budget 2016-17: Arun Jaitley unveils pro-poor budget, pledges reforms

Finance Minister may increase income tax slab from Rs 2.5 lakh to Rs 3 lakh.To shore up revenues to meet the increased expenditure, the Finance Minister may need to increase indirect tax rates or introduce new taxes.

“The Economic Survey has highlighted that India’s potential growth rate is in the range of 8-10 percent and achieving the same requires a push in three critical areas which are promoting entrepreneurship and reducing the role of the state, and higher investments in health and education”, said Harshavardhan Neotia, president of the industry chamber Ficci.

A dedicated irrigation fund worth Rs 20,000 crore to be initiated under NABARD.

Rising rural distress because of back-to-back droughts have put considerable pressure on the finance minister to spend more on social schemes, while at the same time he has to win back foreign investors craving for faster reforms. A schedule for removal of tax exemptions is also expected to be announced in this budget. The fact is in the last two years at the North Block, Jaitley has been able to attract a significant amount of criticism for mishandling of key issues, including bank recapitalisation. According to analysts, the Finance Minister may increase the service tax to around 16 per cent, a move that will bring the rate closer to the revenue neutral of 18 per cent under the proposed GST.

The Finance Ministry is likely to raise taxes for those earning more than Rs 1 crore.

“The importance of the upcoming budget lies in its message on the government’s fiscal consolidation plans”, the American agency said. There is a possibility therefore of the government introducing out-of-the-box policies aimed at greater investment in the agriculture and allied sectors. However, the expectations are low, following the fall in stock markets ahead of the budget.

The domestic currency also slipped on Thursday to end at a fresh 30-month low of 68.72 to the dollar – its weakest level this year so far. The higher the deficit the higher the borrowing and the government’s interest expenses.