Populist, pragmatic, poll-oriented
Though Finance Minister Arun Jaitley made no overt announcement of any populist schemes, with the Election Commission keeping a hawk's eye on the annual Budget being presented in Lok Sabha, he must have strained his ears to hear the applause from the rural sector. It cannot be mere coincidence that Budget for the Financial Year 2017-18 is rural centric and addresses a plenty of issues facing the farmers of Uttar Pradesh, Punjab, Uttarakhand, Goa, and Manipur, the states going to the polls to elect a new legislative Assembly.
Secondly, the Budget also seeks to make a major political appoint on the issue of corruption in public life. Taking up the issue of political funding Jaitley's third Budget has moved to slash the anonymous donation limit from Rs 20,000 to Rs 2000, above which the parties will have to disclose the identity of the donor, makes huge political sense.
Accepting the recommendation from Election Commission, the Finance Minister announced that "As an additional step, an amendment is being proposed to the Reserve Bank of India Act to enable the issuance of electoral bonds in accordance with a scheme that the Government of India would frame in this regard. Under this scheme, a donor could purchase bonds from authorised banks against cheque and digital payments only. They shall be redeemable only in the designated account of a registered political party. These bonds will be redeemable within the prescribed time limit from issuance of bond. Every political party would have to file its return within the time prescribed in accordance with the provision of the Income-tax Act." People may claim that political parties would find ways and means to beat the move, the fact remains that Modi and Jaitley would get the credit for taking the first step towards cleansing the much-corrupted system of political funding. The message that the Prime Minister is serious about cleaning the system would certain help the party in projecting a positive image in the upcoming polls.
The third Budget presented by Jaitley on Wednesday puts great focus on rural India, which amply makes clear where the political priorities of the ruling party lie. The focus of Budget is on expenditure, maintain status quo largely on the revenue side. The Finance Minister has claimed that he has tried to present a comprehensive, time-bound action plan for poverty alleviation. Several measures have been outlined to double the income of the farmers. Pradhan Mantri Krishi Sinchai Yojana is one of them where a substantial allocation has been made to ensure water to every farm. There is a roadmap in this Budget to connect every village by road by 2019. Pradhan Mantri Gram Sadak Yojana has been allocated substantial funds to connect the rural India by roads. Besides, there is a clear plan to provide electricity to every village by 2018.
Jaitley in his Budget speech said that the government wants to take one crore households out of poverty by 2019. Taking a cue from the Prime Minister's New Year speech, more sops have given out for the farmers. The bank credit target for agriculture has been increased to Rs 10 lakh crore. Will the banks be able to deliver on it is something to watched?
The additional concession for the farmers include increase in Fasal Bima Yojana coverage to 40 percent and crop insurance coverage by 50 percent, a Rs 5,000 crore micro irrigation fund and Rs 8,000 crore dairy processing fund. The government will also support NABARAD to digitalise 63,000 primary agri societies. Even allocation has been increased for MNREGA from Rs 37,000 crore last year to Rs 48,000 crore this year. The Budget also proposes to increase the allocation for rural agriculture and allied sectors by 24 per cent to Rs 1,87,223 crore, which should ideally help revival in the rural sector post the demonetisation impact.
All these moves should provide impetus to rural economy and bring about positive changes, provided it doesn't face the hiccups in implementation as the demonetisation plan felt. A somewhat populist Budget would for sure end up disappointing the economic puritans, who would have instead favoured a slew of financial reforms. The Finance Minister announced that the government will infuse Rs 10,000 crore in public sector banks, which constitute 70 per cent of the industry. This is part of the 'Indradhanush' plan to infuse Rs 70,000 crore in PSU banks over five years. Facing the humungous problem caused by bad loans, it was expected that much bigger capital infusion would be made to rejuvenate the state of public sector banks.
However, it would be wrong to say that the Budget focuses on rural India alone. To clear the doubt, the Prime Minister in his comment on the Budget made it amply clear that the government has not lost track of his pet projects. Provisions have been made this time to give impetus to the housing sector and ensure a house to general household. Those who are living in rented house have also got increased rebate in Income Tax over House Rent. Those who are earning up to Rs five lakh will have to pay lesser tax.
Despite these concessions, the Budget has not measured up to the expectations of the salaried class. They expected that the Budget would provide tax benefits such as increase in tax-free allowances, reintroduction of standard deduction and increase in limits of deductions under Section 80C. However, reading the fine print it's now realised that despite the appreciation given by the Finance Minister to the salaried class, he stopped short of rewarding them. Rationalisation in the higher tax slabs could have been a major boost to the salaried middle class as well as other tax payers and would have further increased the tax compliance.
Remaining bullish on the issue of demonetisation, Jaitley has emphasised on the digital payments and payments through the banking channels and proposals such as reducing the threshold for permitted cash transactions to Rs 3 lakhs, provision for disallowance of business and capital expenditure above Rs 10,000 and reduction of rate of presumptive taxation to 6 per cent from 8 per cent to smaller business are steps towards the same. The Finance Minister also proposed an Aadhaar based payment structure and several other initiatives of the government to promote e-payments but the same is difficult to achieve without any parallel infrastructure and regulations to safeguard the people by monitoring the risks and frauds involving digital transactions in India and a lot needs to be done in this connection.
However, the leading light of protest against demonetisation, West Bengal Chief Minister Mamata Banerjee, too, remained equally bullish on the matter. In her reaction to the Budget, she raised a very valid point asking why the Budget failed to come clean on the issue on demonetisation and present figures of the same. To protest against the Government move on demonetisation, the Trinamool Congress boycotted the Parliament for the first two days, when the President's address and Budget presentation were made.
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