“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” ― Winston S. Churchill
The Union Budget 2016 has been hailed as a boon to the farmers as well as derided as an election year budget. Finance Minister Arun Jaitley introduced the budget in the well of the house amidst a global economic slowdown, with national economies world over slowing down to a standstill.
Both the International Monetary Fund (IMF) and the World Economic Forum have hailed India’s economic progress as a “bright spot”, instilling confidence at a time when sectors across the board have shown stagnation and depression. With the crude oil seeing unprecedented lows, major consumer markets saturating and exports falling to record lows; at the same time high numbers of Non-Performing Assets on the balance sheets of public banks and the total amount of bad loans being pegged between Rs. 40,000 Crores to over Rs. 1 Lakh Crores, there are plenty of factors for a less than hopeful economic outlook for the country.
While the Income Tax slabs for taxable income for salaried persons have remained unchanged, a number of measures has made the common office goers cheer for the Modi-government. Increase in rebate for income tax from Rs. 2,000 to Rs. 5,000 and an increase in the Housing Rent exemption from Rs. 24,000 to Rs. 60,000; salaried personnel have a lot to cheer for, with increased savings. The additional saving from reduction in fuel prices comes as a cherry topping on a sweet deal.
With a focus on farming, Mr. Jaitley has proposed a number of changes which is sure to get the rural community’s blessing. One of the highest allocations under MNREGA and various other schemes and funds makes for a brighter looking future for the average farmer. A dedicated irrigation fund and heavy investment in organic farming will come as a direct push also. Having faced a monsoon shortfall of 13%, it is hoped that this much needed stimulus to the Agriculture sector reinvigorates and wins back the lost confidence.
A major area of concern has been the situation of nationalised banks and mounting bad debts, which has been dragging on the stock market heavily. With the bad debts rising with every passing day, allowing Asset Reconstruction Companies to buy them is a positive step in the direction of financial stability. This, coupled with the introduction of the Insolvency and Bankruptcy Law guidelines allows easier breaths with regards to the overall growth expectations of the same. Also, consideration to reduce equity is expected to force these banks into a more competitive phase of business.
In the startup sector, while the budget did hold up to the promises of “Startup India” with Income Tax exemption for first 3 years and reduced taxation in many areas, it doesn’t come through on all the glitter and glam surrounding the announcements. One can’t help but wonder if the focus of the budget is economic progress or assuaging a disillusioned vote bank.
What remains to be seen is, with several big ticket expenditures coming up, like the OROP, 7th Pay Commission and critical requirements of the defence forces, how does the government intend to carry through on its many commitments.