This wasn’t the big bang Budget that some in the BJP claim it is nor was it the ‘phus’ the opposition claimed it was. It is just a steady hand on the tiller
So what are the big takeaways from this Budget for the average reader of this newspaper. Well, unless you earn more than Rs 50 lakh your income taxes have come a bit, as the tax rate for those earning 2.5-5 lakh is down to 5 per cent; basically put that is a Rs 12,500 rupee gift from the Government. If you own an Small or Medium sized company, your effective tax rates have come down a bit. Beyond taxes though this Budget is more evolutionary than revolutionary. The surcharges added to top earners is not only a way for the Government to seem to be attacking the rich, but also make up for the shortfall due to the tax reduction for low-income earners.
There were some other interesting decisions, as the move to a less-cash economy takes hold the Government banned cash transactions exceeding three lakhs. The Government admitted that the ratio of direct taxes to indirect taxes was not optimal, in effect the Government pretty much accused millions of Indian citizens of being tax cheats. And the Government does have a good case for the accusation. With the Income Tax department now using big data analytics, many people who previously took advantage of the large holes in the tax net will start getting caught. With cash donations to charities capped at Rs 2,000, a route that some to escape paying tax has also been plugged. The Government could have taken one additional step though, while agricultural income remains tax free, Arun jaitley should have made it mandatory for those earning above a certain income from agriculture to file income taxes mandatorily. With the income tax forms being further simplified, this would have stopped some really rich ‘farmers’ from taking advantage of this huge loophole.
Yes, the promotion of low-cost building and sops to the moribund realty sector may leave a bad taste in the mouth for some, but on the whole there are also sops to farmers - as some major farming states go to the polls shortly. But just looking at some of the other sectors impacted there are some interesting takeaways. The first thing to note is the infrastructure part of the Budget, as this was the first Union Budget where the Railway Budget was combined with the Budget and boy did they get a huge boost with a Rs 1.3 trillion capital outlay of which Rs 55,000 crore support will be from Government coffers. But the true advantage is that the Finance Minister announced that the railways will be more competitive offering end-to-end transportation solutions. Also the move to list two of the Railways money-spinning subsidiaries IRCTC and IRCON should help the Indian Railways raise capital from the markets far more easily.
But the Railways got a boost from the decision to increase excise duties on Aviation Turbine Fuel; a decision that will almost certainly force airlines to increase their fares. Yet, as more and more Indians get used to flying, it is unlikely that profitable long-distance AC coach passengers will come back to the Railways particularly after the ill-advised move to have ‘flexible’ fares. By allowing the Airports Authority to monetise their land holdings, Jaitley seemed to promote the UDAN scheme of the Government targeted to regional travel.
But most outlays saw standard increases, such as the defence and science Budgets. But the Government doubled down on their Skills and Digital missions and that is a good step. Unfortunately we have been hearing of BharatNet, the fibre backbone that will apparently connect every large Indian village for several budgets now, and while rollout was again promised this year the painfully slow implementation of this overly ambitious scheme is enabling mobile players. However, the announcement of the DigiGaon scheme might mean that the information superhighway might finally reach every nook and cranny of the country. Promotion of digital payments and the BHIM app including the introduction of Aadhaar Pay for citizens without mobile phones were to be expected but most importantly the realisation of the requirement for cyber-security of India’s vastly enhanced digital economy was a welcome decision.