Budget 2020

Budget 2016: A pro-poor push in hard times

Finance MInister Arun Jaitley tries a change in tack to enhance government image.

It’s a problem drivers in Delhi with its numerous roundabouts are familiar with — turning left requires a sharper turn if you are driving in the right lane. Finance Minister Arun Jaitley attempted to do just that as he sought to dispel all notions about the NDA government being a ‘Suit boot ki Sarkar’ in his third Budget, dedicating it to farmers, the poor and vulnerable sections of society while raising taxes on the incomes of the super-rich and introducing new cesses on services and cars to fund farmer welfare projects and infrastructure, respectively.

Mr. Jaitley’s budget for 2016-17 attempted to address the distress in the rural economy that has hit demand creation and new investments, with enhanced outlays of nearly Rs. 2.75 lakh crore for programmes in the social sector, farmer welfare and the rural sector, giving them more play-time in his speech than measures to improve the ease of doing business.





While his 111-minute speech was peppered with some poetry, for a change, and highlighted a new plan to ‘Transform India’ based on action points around nine pillars, references to growth and investments fell by a third from his maiden Budget outing in 2014-15, when the two were cited 65 times.

While he did acknowledge and accept a suggestion by Congress vice-president Rahul Gandhi to exempt Braille paper from taxes, Mr. Jaitley used the opportunity to also score political points citing several parameters on which the NDA government has done better than the UPA in its last three years.

India remained a bright spot in a weakening global economy, the Finance Minister said, despite the fact that ‘we inherited an economy of low growth, high inflation and zero investor confidence’ in the government’s capability to govern.



Key highlights

LPG connections for BPL families

Variable pollution cess on new cars

60% of EPF savings to be taxable

1 per cent excise duty on jewellery



“Our initiatives in the last 21 months have not only placed the economy on a faster growth trajectory but have bridged the trust deficit, created by the previous Government. We had to work in an unsupportive global environment, adverse weather conditions and an obstructive political atmosphere,” Mr. Jaitley said, hitting out at the Congress-led Opposition parties.

Despite higher expenditure owing to the 7th Central Pay Commission and the one rank one pension norm for defence forces, the Finance Minister chose to stick to the fiscal consolidation road map he outlined last year and set a 3.5 per cent of GDP target for 2016-17. “The Government, therefore, has to prioritise its expenditure. We wish to enhance expenditure in the farm and rural sector, the social sector, the infrastructure sector and provide for recapitalisation of the banks,” Mr. Jaitley said, identifying these as sectors that need immediate priority.

Corporate India, which was expecting a cut in tax rate in line with the government’s commitment to bring it down from 30 per cent to 25 per cent over four years, termed the Budget ‘pragmatic’ — a euphemism for ‘there’s not much in it for us.’

Mr. Jaitley did promise more reforms — in taxation, foreign direct investment, dispute resolution in public private partnership projects and banking — and offered to deal with the retrospective tax demands faced by the likes of Vodafone and Cairn through a one-time settlement that would waive all interest and penalties involved.

Finance Minister has done magic, says CEA

Union Finance Minister Arun Jaitley introduced a Rs. 2,000-crore scheme for providing cooking gas cylinder connections to poor households.



In his budget speech, he said that using an open fire in the house was akin to smoking 400 cigarettes and was one of the biggest causes of poor health in families below the poverty line.



He announced a scheme to protect the poor from high healthcare costs with a cover of Rs. 1 lakh and an additional cover of Rs. 30,000 for senior citizens.



He also announced a plan to list public sector general insurance companies and a new policy for strategic sales as well as making public sector enterprises take up fresh investments.



While he promised to raise outlays for social sector schemes, he also said the government would introduce a Bill to give legislative backing to the Aadhaar scheme for identifying residents on the basis of their biometrics.



Giving the Unique Identification programme legal teeth would help the government expand its ambit and possibly, make it mandatory for delivering benefits under various social welfare programmes and schemes. This would facilitate better targeting of subsidies over time. The Supreme Court had earlier asked the government not to make Aadhaar mandatory for such benefits.



“The Finance Minister has missed a significant opportunity to present a breakthrough budget. It is essentially an incremental budget with marginal adjustments in expenditure provisions and revenue estimates,” said D.K. Srivastava, chief policy adviser at EY, adding that the decision to stick to fiscal consolidation appears laudable, but is dependent more on optimistic assumptions regarding nominal GDP growth and reduction in capital expenditure relative to GDP.



“This implies that the government is not actively pursuing any significant fiscal stimulus through public investment. A substantial reduction in the subsidy provisions would have spelt the government’s resolve to create fiscal space for augmenting capital expenditure… The political cycle and proximity of State and General Elections may not present such an opportunity again,” he said.



Chief Economic Adviser Arvind Subramanian said that though the fiscal deficit targets have been retained, the Finance Minister has ‘done magic as the fiscal consolidation planned will not divert from the aggregate demand in the economy.’



Finance Secretary Ratan Watal emphasised that expenditure management has been good and will remain so along “with a continued focus on agriculture, equity and growth.”



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Printable version | Feb 18, 2020 3:04:56 AM | https://www.thehindu.com/business/budget/Budget-2016-A-pro-poor-push-in-hard-times/article14129826.ece

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