High GDP growth and macroeconomic stability in an environment of vulnerable global economic conditions formed the backdrop for Budget 2016-17. The nine-pronged strategy announced in the Budget is comprehensive and covers critical growth drivers for the economy. Industry had called for enhanced public expenditure on key sectors such as agriculture, infrastructure, and low-cost housing without unduly compromising the fiscal deficit target, and this expectation was largely met in the Budget.
The Budget also included some structural reform measures. For example, the distinction between Plan and non-Plan sections will be done away with. The mention of disinvestment and strategic sale of public sector enterprises is also welcome.
Agriculture and the rural economy required a huge boost after two successive drought years, and a holistic package has been rolled out in the Budget. It is heartening to note the increased outlay on irrigation and creation of an irrigation fund of Rs 20,000 crore which will contain risks arising out of monsoon deficiencies. Soil health cards, e-agri markets and interest subvention will go a long way towards reviving the rural economy and alleviating vulnerabilities for farmers.
The infrastructure sector has received a huge impetus in the Budget with roll-out of Rs 2.21 lakh crores for roads, railways and other facilities. We are particularly happy to see the high priority accorded to public-private partnerships in the infrastructure sector, including introduction of a bill for dispute resolution, renegotiation of concession agreements, and a new credit rating system. The various steps for stressed assets and strengthening asset reconstruction companies would also help to unclog the investment pipeline.
Employment generation in the formal sector was explicitly mentioned in Budget 2016-17 through various means. The contribution of EPFO for new employees, extension of section 80JJAA to all assessees subject to statutory audit, and model shops and establishments Bill are some of the incentives that will encourage new job creation.
Additionally, several sectors such as housing and transport have received a boost and would contribute to more employment. The different policies for entrepreneurship development such as amendments in Companies Act, entrepreneurship training in colleges and schools, and relaxation for small enterprises under presumptive taxation scheme would also aid setting up of new enterprises that generate jobs.
For healthcare, the extension of cover to Rs 1 lakh per family and introduction of Jan Aushadhi Yojana stores can be life-savers for poor families. Similarly, the initiatives on promotion of skill development, setting up of 1500 multiskill training institutes, and a financing agency for higher education are welcome for building human capital.
The Budget also continues on the path of simplification and rationalization of tax administration. The Finance Minister reiterated his commitment to providing a stable and predictable tax regime. Dispute resolution is sought to be strengthened under the Budget through various means and a time limit has been introduced for disposing of petitions on interest waiver. The increase in limits for cases under single-member Benches and creation of new Benches would also fast-track dispute resolution.
The Budget has taken care to mention some exemptions proposed to be phased out in synch with lowering of corporate income tax rates. We were also expecting more cuts in the corporate tax rate in advance of the roadmap as enunciated by the Finance Minister in last year’s Budget, but this was not the right time, given global risks and added expenditures.
Regarding the regime of indirect taxes, the addition of cesses and surcharges for infrastructure, rural investments and the environment appears reasonable and justified, although it contributes to the complexity of the tax structure.
In sum, Budget 2016-17 presents a balanced perspective on the economy which will go a long way towards cementing India’s position as the world’s fastest growing major economy.
