After the Big Bang of demonetization, everyone was waiting for a Big Bang Budget. Which was delivered selectively for the Small - small farmer, small business, small tax payer, small housing, If you're into infrastructure, there's a Big Bang there too. But if you are the big corporate sector or among the many stressed banks, this is not quite the budget that you would have wanted.
The small tax payer and the salaried class did get some relief. Halving the tax rate to 5% for those with income between 2.5 lakhs and 5 lakhs helps most tax payers and may
encourage more people to be more tax compliant. Small and medium scale industry got a drop of 5% on their tax rate, which according to the Finance Minister Arun Jaitley, would benefit 96% of businesses.
The emphasis on black money remained. The Finance Minister hopes that the lowering of taxes will incite more disclosures and promised no scrutiny for first-time tax payers. Digital transactions were encouraged by offering small business under the presumptive income scheme. For all income through digital transactions under this scheme, the presumptive profit would be 6% and not 8%, as otherwise.
Long-term capital gains tax was also changed for housing, with the holding period of property being reduced from 3 to 2 years, and the base year for indexing being moved to 2001 from 1980. Cash transactions above 3 lakhs have also been banned as part of the war on black money.
The innovative idea of RBI electoral bonds which people can buy and give to political parties, or make digital and cheque payments to them, has also been encouraged. But in the grand scheme of political funding and trying to nudge elections away from black money, this is no real game changer. In fact, it could be seen as little more than saying "See, we politicians are also trying to clean up our system." And if you saw the MPs when Jaitley pointed out that there are just 20 lakh people who are not salaried that declared an income of more than Rs 10 lakhs, you had to ask how many of them have a clear conscience. And therein lies the problem with this budget and black money. There were ideas, and some tax relief and encouragement to become compliant, but there really wasn't a sweeping move to bring millions into the tax net. Jaitley lamented that while 2 crore Indians travel abroad, only 76 lakhs seemed to earn more than 5 lakhs - his budget doesn't appear pried to change that.
The problem here is that he has not addressed the issue of endless deductions that businesses, from single owners to larger corporates, show as expenses, from buying cars every three years to avail of depreciation, to travel and other business-related spends. This leads to the problem that he has mentioned; only 2.85 lakh businesses in India declare a profit of more than Rs 1 core.
But if black money isn't going to go away, then at least Jaitley has done infrastructure and rural India good. The massive increase in spend in all infrastructure to Rs 4 lakh crores and 24% increase in rural areas will help drive the rest of the economy. The
emphasis on roads, railways, ports, and airports will lead to direct job creation and, post the completion of infrastructure projects, will drive more businesses. Both rural and urban affordable housing are also getting a big boost, and again, the building industry will grow well, driving more jobs especially for those who are unskilled and semi-skilled.
The financial sector was also one of the themes of the budget and while most of what Jaitley outlined may seem small, these are steps that help in the way business is done in India. Abolishing the
FIPB or Foreign Investment Promotion Board is a major step which investors have been asking for. Amending the arbitration act for dispute resolution of infrastructure projects will bring relief to projects bogged down with disputes. And those who get conned by "financial schemes", Jaitley has promised a bill to amend the multi-state Cooperative Societies Act and a bill to deal with illicit deposit schemes.
Other things that are worth noting is the timetable to eliminate many diseases that still affect many Indians especially the poor. The continuing push on Swachh Bharat, solar energy, creating village ponds is all very necessary and seldom gets much attention.
The biggest macro step has been the government's acceptance that needs to keep its debt in check and keep the fiscal deficit on target. So while Jaitley hasn't brought the fiscal deficit down to 3%, he is promising a fiscal deficit of 3.2% in 2017-18, the same number as the revised estimate for this year, and 3% the following year. And if he does this, it will really help keep inflation down and improve the credit rating of our country. This re-enforces his pledge to keep the country within a fiscally prudent policy. So all the large increase in spends have been justified by the expectation of a large increase in revenue, which Jaitley said can already be seen after demonetization and he clearly expects this continue next year.
While there is always room for criticism, the fact is that this budget did very little that could be construed as negative. That is very important in the context of a country that has gone through a traumatic period during demonetization. There is a feel-good factor about this budget, something that shows that there is concern for and policies to deal with poverty, the rural sector, black money, and infrastructure. So, while big business may not celebrate, the budget cannot be faulted in the direction it is trying to take the country.
Finally, it is up to the citizens of the country to make it easier for the government to provide policies and services that work by paying their taxes. As Jaitley pointed out - in a country that sees 1.25 cr cars being sold each year, how is it that only 1.72 lakh people have an income of more than Rs 50 lakhs? There are probably more cars on the road that cost more than Rs 50 lakh than tax payers. Unfortunately, there seems to be no limit to our dishonesty and perhaps these are the people that should be branded anti-national.
This article is based solely on the contents of the speech and the writer has not been through the detailed documents.
(Ishwari Bajpai is Senior Advisor at NDTV)Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.