Union Budget 2017-18, was tabled today in Parliament, breaking many age old traditions – presented on the first working day of February rather than the last, subsuming the railway budget within itself and doing away with a differentiation between planned and non planned expenditure. The emphasis in this budget is on capital expenditure, which has been pegged at 25.4%.
Prudent fiscal management, better tax administration and a push to a digital economy are important themes for this year’s path breaking budget. Fiscal deficit for 2017-18 has been pegged at 3.2% of the GDP and the Government is committed to remaining within 3% for the next three years.
Focused on giving a push to the rural economy, youth, the poor and infrastructure development, the budget is largely development focused. With several monitoring measures in place, this budget goes beyond making announcements – it is an outcomes oriented budget.
With a number of schemes for farmers and rural population, rural spending is likely to expand. Through this budget the Government aims to bring almost 1 crores households out of poverty by 2019. After almost 98% sectors had been opened to FDI through automatic route, the scrapping of the Foreign Investment Promotion Board (FIPB) is a very welcome move. It is being hailed as the fall of the last vestige of the License Raj.
Huge government spending of Rs 3,96,135 crores in infrastructure, will be a significant growth driver. A total of Rs. 1,31,000 crores have been allocated for the Railways. Modernization of railways, increased length of the railway corridor and implementation of an end to end integrated transport solution for select commodities, customized rolling stocks and practices for transport of perishable goods are all focused on improving ease of doing business in India. A total of Rs. 1,31,000 crores have been allocated for the development of Railways of which Rs. 55,000 crores will be provided by the Government. The railways expenditure will be focused on Passenger safety; Capital and development works; Cleanliness; and Finance and accounting reforms.
On the corporate side, the Micro, Small and Medium Enterprises (MSMEs) will likely become more competitive with a substantial 5% tax break. However, no reduction in the corporate taxes has led to some disappointment in the corporate circles. The Banking sector is likely to get some relief with enhanced NPA provision to 8.5% from the earlier 7.5% and from the removal of liability to pay tax on accrued interest payments. The focus on affordable housing might increase the demand for loans, something to cheer for in a muted credit scenario.
Overall, the budget is likely to fuel consumption with increased spending on MNREGA, more personal income in the hands of the small taxpayer. The focus on rural economy, empowering the youth and women as well as affordable housing will build long-term prospects of the Indian economy.
Read the sector specific announcements here.