Union Budget 2016-17: Spotlight on fiscal prudence

With an eye on supporting the small tax-payer and the small investor, the Minister announced a slew of schemes, and income tax exemptions.

“While the budget provisions could have been made more substantive with respect to the urgent needs of infrastructure development, they seem to be adequate to keep the economy moving forward in the coming year”, said Vishwas Udgirkar, senior director, Deloitte India.

This budget is aimed squarely at India’s farmers, who are suffering after two bad monsoons and with high inflation.

The government came to power almost two years ago promising to transform India’s economic fortunes, but has been hampered by the global economic slowdown and a failure to push much-needed reforms through parliament.

Also, he said farmers’ income will be doubled in five years and promised to bring more land under irrigation.

But, despite hefty commitments on rural welfare and health, Jaitley managed to stick to his fiscal deficit target of 3.5 per cent of gross domestic product for the 2016/17 fiscal year that starts on April 1 – a pledge that may open the way for an early interest rate cut by the Reserve Bank of India.

For the agriculture sector and farmers’ welfare, the government has allocated 359.84 billion rupees and 385 billion rupees for a rural employment guarantee scheme which provides 100 days of manual work a year for every rural household in the country.

Increased relief for middle-class tax-payers by raising the ceiling of tax rebate under Section 87A to Rs5,000 for individuals with income less than Rs5 lakhs and by raising the limit of deduction of rent paid under section 80GG to Rs60,000. With a nine-point agenda in his budget speech, he stated that “India has been hailed as a bright spot amid slowing in the global economy by International Monetary Fund”.

“Whether it is political considerations or economic considerations, both converge in that direction, that you must help that sector of the economy”, Finance Minister Jaitley said.

Today the biggest challenge to economy is rural distress and agrarian distress.

The ruling Bharatiya Janata Party (BJP) seems to be hijacking ideological territory more associated with the left-leaning Congress party as it tries to counter accusations it doesn’t do enough to help the poor. The total outlay on roads and railways will be 2.18 trillion rupees in 2016-17.

Shifting focus to farmers and rural poor, Finance Minister Arun Jaitley unveiled his third Budget which lays emphasis on agricltural and social sectors.

“It’s heartening to see that a lot of measures have been taken to improve agricultural infrastructure and productivity, besides providing short-term stabilization support to farm sector reeling under the stresses of back to back drought”, L&T Finance Holdings Ltd chief economist Rupa Rege Nitsure said.