Union Budget was presented when five states were in in election mode. The FM lived upto expectation. His confidence emnates from demonetisation. It is expecting that the long term impact of demonetisation will lead to a course correction in country’s economy.
This budget was a historic in many sense. Not only did the government advanced the budget presentation to February 1st, it also altered the economic aspects of the budget presentation. The budget was to be presented at a time, when five states are caught up in the election fever. Election Commission had already issued the budget related guidelines; it had mandated that government can’t announce any special scheme or provision which directly affects these states. Government took these guidelines positively and used this occasion to display political righteousness, despite the charged up political atmosphere. The courageous step to make the political funding more transparent has augured well with the aam aadmi. Government has made it mandatory to declare all political donations above Rs 2000. This, when seen in the aftermath of demonetisation, is like a double whammy for the black money. This is surely going to smoothen the way for clean politics in India.
The figures from Economic Survey didn’t present a very rosy picture. GDP growth for the current fiscal 2016-17 is pegged to be at 6.5 percent, compare to 7.6 percent last fiscal. Government has claimed that in the next fiscal it will catch up with the number. One of the major reasons behind government’s confidence is demonetisation. It is expecting that the long term impact of demonetisation will lead to a course correction in country’s economy. In last three months, a lot of water has flown under the bridge. Impetus on cashless economy is surely going to create strong linkages between the markets and the economy.
At this moment, government is trying to dissuade the fears of high inflation due to the provisions of Seventh Pay Commission. Government is claiming that the fiscal deficit will also be well under control. It is also hoping for a revival in manufacturing, which saw a slump. A lot of government’s focus will be on generating new employment, which has been a painpoint for quite some time. This year’s budget is a veiled attempt to send a direct and clear message to the nation – everything is under control and the ‘achhe din’ are going to follow soon.
If we take a look at the major announcements by Finance Minister Arun Jaitley, it is quite evident that government’s focus is on the rural India and the youth. Income tax rate was cut to 5 percent for the individuals having income between Rs 2.5 lakh to Rs 5 lakh. Earlier it was 10 percent. In order to counter the expected Rs 15,000 crore loss due to this rate cut, government has placed a 10 percent surcharge on individual income above Rs 50 lakh and below Rs 1 crore. 15 percent surcharge on the income above Rs 1 crore will continue. Government has been accused of ignoring the agricultural sector for last three years. Consecutive droughts in last two years have stymied the agricultural growth, but last year’s good monsoon had rekindled the hope. Government is expecting the agricultural growth to exceed 4 percent this fiscal.
Government has promised the nation that by 2019, at least one crore families will cross the poverty line to lead a better life. It has also reiterated its resolve to double the agricultural income of farmers by 2022. In this regard, government has announced that in next fiscal Rs 10 lakh crore will be provided as agricultural loans to the farmers. Opposition has accused government of conveniently ignoring MNREGA. In this budget government has increased the MNREGA allocation to 48,000 crore from Rs 38,500 crore. This is highest ever allocation.
Prime Minister Modi had already announced the scheme to provide pregnant women financial aid of Rs 6000, which will be applicable across the country. The budget provided for construction of 1 crore new homes in next 2 years under Pradhan Mantri Awas Yojana (PMAY).
Fortunately, for the government didn’t get entangled in the complexities of numbers, due to the advancement of the budget presentation date. Even Election Commission won’t object to this smart move by government. Election results from the 5 states will be a good indicator of the impact and acceptance of government’s move by the public.
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