The presentation of the Union Budget for 2016-17 in the Lok Sabha on February 29 was preceded by that of the Economic Survey reflecting the state of health of the Indian economy. This year Survey’s tone was not as sanguine as the picture given last year. Apart from external factors, there was an admission of internal political failure to push economic reforms. The issue of passing the GST Bill has been proving elusive so far. PSU disinvestment during 2015-16 fell short of the target and the next stage of subsidy rationalization is in progress.
The challenges before Finance Minister Arun Jaitley were to kick start the investment cycle to deliver the promise of development in India, infuse a fresh amount of capital into banks to help them solve their problem of stressed assets estimated to be Rs 1.5 lakh crore and enable them to resume their lending to industry, control the fiscal deficit and the rate of inflation, increase the tax base and the number of taxpayers in the country and raise more revenue through a bigger collection of both direct and indirect taxes and more funds through disinvestment in public sector undertakings by selling their Government equity.
As usual the business, industry and common citizens of India had their own expectations from the Budget 2016. Many sections of society are not pleased with the budget proposals. At the same time many businessmen and other Indians have welcomed the Budget.
The Budget does not envisage structural reforms in the Indian economy which could have been carried out with an NDA majority in the Lok Sabha. It has tried to address the twin issues of growth and inclusivity while staying within the limits of fiscal discipline. The rural and agriculture sector facing distress has been given a stimulus of more investment and expenditure on public projects like the building of roads and creating more irrigation facilities. A provision has also been made to provide power to all villages in the next few years. A push to the social sector and healthcare for the poor and vulnerable sections of society has also been given in this Budget. These measures will fulfil the basic requirements of bijli, paani and sadak in rural India, present a pro-poor and pro-farmer image of the Government to meet the criticism of it being the pro-corporate and can help the BJP get more votes in the coming Assembly elections in four States and a Union Territory.
EDUCATED UNEMPLOYED YOUTH
Higher budgetary allocations for the MGNREGA and Skill India schemes will help in providing more jobs in rural and semi-urban areas of the country. There is, however, no attempt to meet the aspirations of educated unemployed youth in bigger cities. Little has been done to check the falling volume of India’s exports to earn more valuable foreign exchange and boost the tourism sector to generate more employment.
The middle class is unhappy because of no budgetary relief in income tax rates. Neither the IT exemption nor the Section 80C limit has been raised. However, the Finance Minister made an announcement in the Lok Sabha on March 8 withdrawing the budget provision that sought to tax withdrawals from the Employees Provident Fund.
There is no attempt to widen the tax base or increase Government revenues. The Budget is silent on any further measures to bring back Indian black money stashed abroad as per promises made during BJP election rallies. The experience of operating two schemes during the Emergency in 1975 and 1997 suggested a partial success of the VDIS. There was a harassment of taxpayers through intensive surveys, searches and aggressive marketing. Efforts made to raise revenue through surcharge and cess in indirect taxes is a regressive form of taxation and will tend to push up prices and hurt the middle class.
There is a provision in the 2016-17 Budget for achieving higher disinvestment though the target could not be achieved in the 2015-16 year. An independent body will oversee the sale of PSU assets and the Department has been renamed as Department of Investment and Public Management.
Since it is not possible to please all sections of society, the Budget 2016 has evoked a mixed response from various experts.