Finance minister Arun Jaitley has given priority to agriculture, rural economy, skill development, social welfare and infrastructure development in the Budget, but he will have his task cut out as global economic turmoil looms in the year ahead.
No sufficient provisions to give a boost to trade and industry
The Budget has failed to make sufficient provisions to give a boost to trade and industry. The exports have registered a fall for 14 months in succession. The private sector is struggling and public sector banks are under pressure due to burgeoning non-performing assets that refer to loans whose principal or interest amount has not been paid for 90 days.
Investments in many sectors have dried up because there are no clear indications of demand, and companies operating in these sectors are afraid of making new investments.
It is clear that companies around the globe will not choose India solely based on ‘Make in India’ slogans. Exports are not going to pick up unless there is an effective implementation of new foreign trade policy.
No major incentives for the middle class and the salaried class
The finance minister did not announce major incentives for the middle class and the salaried class. He left the income tax exemption limit slabs unchanged while giving some relief to people who plan to purchase a new home. An increase in tax exemption limit would have not only given relief to the middle class from high inflation but also led to an increase in demand. No steps have been taken to encourage small savings, which are critical in any economy, by increasing the rate of interest.
There are 3.50 crore tax payers in the country — a tiny 3% of the total population — and out of these, about 90% taxpayers fall in the category of Rs 5 lakh annual taxable income. However, the total contribution of these 90% taxpayers to the total tax collection is only about 10%. The Justice Easwar committee formed to look into ways to simplify the taxes had also recommended that TDS (tax deduction at source) limit should be raised and the income tax rate for this category should be reduced.
With no clarity on the date of implementation of goods and services tax, Jaitley has raised the service tax rate from 14.5% to 15% and this will lead to a marginal increase in prices across the board.
No indication of how the govt will overcome the adverse impact of global economy turmoil
There is no indication of how the government plans to overcome the adverse impact of global economy turmoil. In 2008, India was unaffected as the domestic demand was strong and investment scenario was rosy. However, things are worrisome now, and no effective steps have been taken to increase public expenditure. India’s GDP is slated to grow at 7%-7.5% in 2016-17, but the rural economy-centric Budget has left many holes unplugged.