Union Finance Minister Arun Jaitley’s maiden Budget signalled bold strides on the intent of the Modi government to deliver on its election promises but stopped short of unveiling clear strategies for achieving them. At one level, it signalled broad continuity with the policy thrust of the UPA government.
At a time when high inflation is eroding purchasing power, the Finance Minister has sought to put more money into the wallet of the common man with his personal tax proposals. These include raising the personal income tax exemption limit to Rs. 2.5 lakh from the existing Rs. 2 lakh. For senior citizens, it is to go up from Rs. 2.5 lakh to Rs. 3 lakh.
In addition, investments up to Rs. 1.5 lakh, instead of the present Rs. 1 lakh, will receive relief under Section 80C of the Income Tax Act.
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Mr. Jaitley increased the deduction for interest payment on self-occupied house property to Rs. 2 lakh from the existing Rs. 1.5 lakh.
The Budget’s stated intent is to lay down broad policy indicators to enable the Modi government to deliver on its election promises of big-bang economic reforms, lower inflation, jobs, empathetic governance, augmenting infrastructure and basic amenities.
Many of the much-awaited reform announcements did come but only as half steps: the Budget promised clarity on taxation but yet failed to repeal the retrospective tax amendment made in 2012. The proposed hike in the foreign direct investment cap to 49 per cent in the defence and insurance sectors came with the rider of full Indian management control, a potential disincentive for overseas investors.
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Not surprisingly, an hour into the speech, the Sensex plunged over 300 points; it recovered as the Finance Minister started reading out the personal tax proposals. The Sensex finally ended the day with a loss of 72.06 points.
Mr. Jaitley more or less maintained the arithmetic of the interim Budget presented by the Manmohan Singh government in February. He did not disturb the previous government’s schemes and projects including MGNREGA, the National Livelihood Mission and Industrial Corridors. He left the allocation for MGNREGA unchanged at Rs.34,000 crore.