FM is betting big on an economic upturn: U R Bhat

I think it is a very good budget with emphasis on housing and rural development. There is some stability in terms of taxation for corporates. Every budget, there is some uncertainty in the markets as to how the corporates will be taxed. There were some expectations that the tax rates could probably be brought down, but then that has not been done. So, it is par for the course.

On the other hand, smaller companies that bore the brunt of demonetisation exercise have been given enough impetus in taxation. In terms of allocation, the money directed towards housing and rural India has been long due.

The other sector that has benefitted is banking. By addressing the non-performing assets (NPA) issue – allowable provision for non-performing asset of Banks increased from 7.5% to 8.5%; and interest taxable on actual receipt instead of accrual basis in respect of NPA accounts of all non-scheduled cooperative banks also to be treated at par with scheduled banks – are two significant steps, in my opinion. As a result, the banks will be liable to pay tax when they actually receive the funds instead of paying on an accrual basis.

Focus on rural development and spending on housing are the two central themes and the key points in Budget 2017. This is probably what was needed now, especially after demonetisation. I think the finance minister has addressed these two issues quite well in the budget.

However, the amount allocated towards banks’ recapitalisation (Rs 10,000 crore) seems less. This is one thing that the market was expecting to be higher than what has been allocated. But, if the FM Budget 2017-18 has given some incentive for NPA recovery – with an upturn in the economy, there is a case for some of these NPAs to become ‘performing’ assets over a period of time. In case this does materialise, I don’t think there is a case for allocating huge amount towards recapitalisation. That apart, the FM has promised to allocate more, if needed. In other words, the FM is betting big on an economic upturn.

As regards political funding, I am unsure how this will happen as the threshold levels of Rs 2,000 is quite a small amount. However, a beginning has been made – and that is a positive step.

The fiscal deficit target of 3.2% for FY18 also seems logical. Though there were expectations of 3%, given the demonetisation impact, this target of 3% looked a bit stiff to achieve. The net borrowing figure has been lowered, and that saw bond yields softening a bit. I expect the Reserve Bank of India (RBI) to cut interest rates in future. This should also augur well for the economy and the government’s fiscal arithmetic as Arun Jaitley is not a big believer in market borrowings.

The one thing that was missing was more details on demonetisation and its impact on the economy. I am unsure of if the government has the data yet. The government is expecting some inflow from the tax notices that they have sent.

The relief to the small-taxpayers in terms of halving the tax rates to 5% for those between Rs 2.5 lakh – Rs 5 lakh bracket is a very welcome step. The whole idea is to widen the tax base with a hypothesis that more people should be a part of the taxation mechanism. Lending stability to the taxation mechanism – for individuals and corporates – is one of the key elements in economic recovery.

Overall, I think it is a very fair budget.

FM is betting big on an economic upturn: U R Bhat

Arun Jaitley attempts a clean-up job in Budget 2017

Presenting the Union Budget for 2017-18 on Wednesday, Finance Minister Arun Jaitley attempted a clean-up job across the board – including on macro-economic indicators, some troubled sectors, and on tax compliance. A major impact on the Budget-drafting process was quite evidently the decision by the government last November to demonetise high-value currency notes.

Jaitley chose to deviate from the exact path of fiscal consolidation slightly, budgeting a fiscal deficit of 3.2% of gross domestic product in 2017-18 instead of the previously projected 3%. However, he did still shrink the deficit, and promised to hit the 3% target in 2018-19. The six consecutive years of fiscal consolidation by successive governments add up to a visible and credible commitment to macro-economic stability in India.

Graph Jaitley stayed true to fiscal consolidation partly by keeping projected expenditure growth low, at only 6.5% – although overall nominal GDP growth has been projected at 11.75%. In order to finance union budget 2017 spending, Jaitley has relied heavily on personal income tax, expected to grow almost 25% in 2017-18.

This increase in personal income tax will come in spite of a halving in the tax rates payable by those with incomes between Rs 2.5 lakh and Rs 5 lakh, from ten to five%. This will be partly offset by an increase in the tax rates further up; a new slab of taxpayers has been created, with income between Rs 50 lakh and Rs 1 crore, who will pay a ten% surcharge on their taxes. Jaitley explained his tax cut as a “reward” for honest taxpayers, and presented statistics on the extent of tax evasion in India, which he called “largely a tax non-compliant society”. To reduce evasion, he banned cash transactions of more than Rs 3 lakh.

Other measures also bore the imprint of demonetisation. The FM said the Budget had been crafted to put a special focus on the rural and agricultural sector and the poor, among others – sections hit hard by the currency withdrawal. He declared an expansion of the electronic agricultural marketing mechanism for produce, and also of the funds allotted to irrigation. Over the year 2016-17, the rural employment guarantee scheme spent almost Rs 47,500, a 23% increase over the Budget allocations – a sign of possible rural distress. Jaitley allocated a similar amount to the scheme for 2017-18 as well.

The digital economy, also a focus of the demonetisation exercise, received further boosts from the Budget, with a regulator being promised within the Reserve Bank of India and specific tax incentives offered for digital payments. The last Budget provided some incentives to start-ups; this one relaxed the criteria for accessing them.

But perhaps the most important post-demonetisation political point in the Budget was a proposal to clean up the financing of political parties. The ceiling for individual donations in cash was proposed to be lowered to Rs 2,000 from Rs 20,000, and a system of “election bonds” announced which would both reduce the reliance on cash to fund elections and also preserve the secrecy of political donations.

Arun Jaitley attempts a clean-up job in Budget 2017

Andrew Holland: Markets enjoying lack of negatives in Budget

There is nothing ground breaking, but there is nothing negative either. There is nothing that’s bad about this budget. That’s the reason why the markets saw a huge rally post the budget proposals were unveiled. There consistency on the affordable housing which is a key positive.

On the taxation front, I don’t see any big increase in anyone’s pay packet. On the contrary, those earning above Rs 50 lakh will pay an additional 10% surcharge. In a nutshell, the Budget Speech 2017 proposals have been a continuation of the policies that the government has followed over the years – i.e. spend on infrastructure and housing.

The abolition of Foreign Investment Promotion Board (FIPB) is a welcome step and this signals that India is more open to the outside world. The transparency is political funding is another welcome move. As far as I am concerned, there are no negatives in the budget proposals.

Clarification on offshore taxation proposals is a welcome step and the foreign investors are likely to see this as positive development. Most FIIs, in my view, will see the proposals as a continuation of the existing policies of the government – and that is a positive. The markets and investors are enjoying that there are no negatives in this budget.

Andrew Holland: Markets enjoying lack of negatives in Budget

12% increase in social sector schemes

In all, the total spend of the government on 28 core social sector schemes that impact the rural and social sector went up by 12.14 % from Rs 2.46 lakh crore Re in FY16-17 to Rs 2.80 lakh crore budgeted for FY17-18. The health-related schemes enjoyed one of the highest increases in terms of allocations on the social front and the housing programme did on the rural front.

The Pradhan Mantri Gram Sadak Yojna for rural roads which has done relatively well (average per day construction was 114 kilometres against target of 133 kilometres) in the current year got the same allocation for next year pegged at Rs 19,000 crore. The rural and urban housing scheme saw a collective increase of Rs 8,026 crore even as the government scaled down expectations of the number of houses to be built owing to the extremely slow take off in FY16-17. The real estate industry though did get a boost with affordable housing being given the infrastructure status.

Using a composite index of development that has been touted for a while, the finance minister announced a Mission Antyodaya to bring 1 crore households out of poverty and make 50,000 gram panchayats poverty free by 2019. But, he claimed it would be done by efficient use implementation of existing schemes.

If the rural development component of the budget looked conservative, the social development components and the centrally sponsored schemes too look challenged by the fiscal maths, except for the health sector. On the face of it, the health ministry got a substantial 23.5% increase in budgetary allocation, over Rs 38,343.33 crore revised estimate for FY16-17 to Rs 47,352.51 in FY17-18. But the national urban health mission component Budget News remain stunted with meagre allocations. The government’s plan for up to Rs 1 lakh health insurance remained stuck in pipeline as the finance minister instead put extra money in to the rural health mission and medical education. Besides, he announced an Aadhaar-linked smart health card for the elderly.

The outgo on the enhanced maternity benefit scheme that the Prime Minister had announced on December 31 was contained by putting additional conditions on beneficiaries and the budgetary allocation was contained at Rs 2,700 crore, up from the Rs 634 crore spent on merely the curtailed pilot in FY16-17.

The education sector didn’t get as much extra support for the coming fiscal. The National Education Mission got Rs 29,555 crore against Rs 28,250 crore as per the revised estimate for FY16-17 and the two education departments collectively saw an 8% increase in their allocation. But on both health and education, by announcing schemes and programmes, the government showed indications of moving ahead without over arching national policies being finalised.

The rural component of Swachh Bharat Mission got an additional Rs 3,948 crore over last year’s RE of 12,800 crore but the urban component saw no increase and neither did the drinking water mission.

On the jobs front the finance minister announced that the Pradhan Mantri Kaushal Kendras (PMKK) would be increased ten-fold from 60 districts to 600 districts but the budgetary allocation was increased from only Rs 2,140 crore RE to Rs 2,924 for FY17-18.

Similarly, the government may have set a target for banks and NBFCs to double the loans classified as MUDRA from Rs 1.22 lakh crore in FY116-17 to Rs 2.44 lakh crore in FY2017-18 but it cut its own commitment to the scheme down from Rs 2,610 crore to Rs 2,013 crore and decided not to infuse additional equity in the MUDRA refinancing bank. It had put in Rs 900 crore in FY16-17.

12% increase in social sector schemes

Budget 2017: What’s cheaper, what’s dearer

Though Finance Minister Arun Jaitley in his budget speech for 2017-18 on Wednesday said his proposals on excise and customs duties will not result in any significant loss or gain to the exchequer, the fine print suggests a host of items can become either cheaper or dearer.

Items like LED lamps, solar panels, printed circuit boards for mobiles, micro ATMs, finger-print machines and Iris scanners will potentially become cheaper.

On the other hand, silver coins, cigarettes and tobacco, bidis, pan masala, goods imported through parcels, water filter membranes and cashew nuts will become dearer.

“Centre, through the Central Board of Excise & Customs, shall continue to strive to achieve the goal of implementation of GST (Goods and Services Tax) as per schedule without Budget 2017-18 compromising the spirit of co-operative federalism,” Jaitley said while presenting the Budget.

“Implementation of GST is likely to bring more taxes both to central and state governments because of widening of tax net. I have preferred not to make many changes in current regime of Excise & Service Tax because the same are to be replaced by GST soon,” he added.

Budget 2017: What’s cheaper, what’s dearer

Highlights: Jaitley delivers fiscally prudent Budget 2017

Here are the highlights of Jaitley’s budget for the 2017/18 fiscal year that begins on April 1.


* The 2017/18 budget seeks to pursue prudent fiscal management to preserve financial stability.

*Fiscal deficit at 3.4%

*Revenue deficit stands reduced to 2.1% in Fy18


* Jaitley says India seen as an engine of global growth


* Demonetisation “a bold and decisive measure”, will make GDP bigger and lead to higher tax revenues – finance minister

* Hit to economy from government decision to outlaw high-denomination notes will be “transient”, effects of demonetisation not expected to spill over to next year

* Pace of remonetisation has picked up and will soon reach comfortable levels

* Surplus money in the banking system will lower borrowing costs, increase credit flow


*Consumer price index inflation is expected to remain within the central bank’s mandated range of 2 to 6%


* India to spend more in rural areas, infrastructure and poverty alleviation

* The government will continue process of economic reforms for the benefit of poor

* Allocation under MNREGA increased to Rs 48,000 cr from Rs 38,500 cr; highest ever allocation

*Dedicated micro-irrigation fund will b set up by NABARD to achieve goal of ‘Per Drop More Crop’.Initial corpus will be Rs 5,000 crore

*Mission Antyodaya to bring 1 crore households out of poverty and to make 50,000 Gram Panchayats poverty-free: FM Jaitley

*Propose to double the lending target of Pradhan Matri Mudra Yojana and set it up at Rs 2.44 lakh crore for 2017-18: FM Arun Jaitley


* With a better monsoon agriculture is expected to grow at 4.1% in 2016/17

* Agricultural credit target fixed at 10 trillion rupees for 2017/18

*Total allocation for rural, agricultural and allied sectors for 2017-18 is Rs 1,87,223 cr, which is 24% higher than last year

*100% village electrification will be achieved by May 1,2018

*To complete 1,00,00,000 houses by 2019 for houseless and those living in kaccha houses

*Issuance of soil health cards have gathered momentum, will setup a mini lab in krishi vigyan kendras

*Railway related state-run companies like IRCON and IRCTC to be listed on stock exchanges: FM Jaitley


*3.5 Crore youth will be trained Budget 2017 India under Sankalp program launched by the government


*Unmanned railway level crossings to be done away with by 2020

*Railway related state-run companies like IRCON and IRCTC to be listed on stock exchanges

*A new metro rail policy will be announced, this will open up new jobs for our youth

*3,500 km rail line to be commissioned in 2017-18

*By 2019 all coaches of Indian Railways will be fitted with Bio-Toilets


*34% increase in disclosure of personal income tax

* Out of 3.7 crore who filed tax returns in 2015-16, only 24 lakh persons showed income above Rs 10 lakh

*The net tax revenue grew by 17% in 2015-16

*For MSME sector: Income tax reduced to 25% with turnover upto Rs 50 crore

*Capital gains tax to be exempted, for persons holding land from which land was pooled for creation of state capital of Telangana

*3-yr period for LTCG tax on immovable property reduced to 2 years; base year indexation shifted from 1.4.1981 to 1.4.2001

*Propose to reduce existing rate of taxation of those with income between 2.5 lakh to 5 lakh from 10% to 5%

*Surcharge of 10% for those whose annual income is Rs 50 lakh to 1 crore

Political Funding

*Maximum cash donation any party can receive will be Rs 2000 from one source: FM Jaitley


* “India stands out as a bright spot in the world economic landscape.”

* “My approach in preparing the budget is to spend more on rural areas, infrastructure and poverty alleviation with fiscal prudence.”

* “Signs of retreat from globalization have potential to affect exports from many emerging economies, including India.”

Highlights: Jaitley delivers fiscally prudent Budget 2017

FM inches closer to fiscal targets, bold moves on political transparency

A fiscally strapped finance minister has been most reluctant in offering sops to the Indian citizens expecting payback from their patience in standing in queues to change or deposit high value currency notes. In Budget 2017-18, placed in Parliament, finance minister Arun Jaitley has put his emphasis on inching as close as possible to the fiscal targets, changing the norms for recognition of capital expenditure to show the government has delivered on socially necessary targets and expanded the powers of the tax officials to go after unaccounted income. He has expectations that the GST will come in but cannot even now put a firm date to it except to say “an extensive reach out effort to trade and industry for GST will start from 1st April, 2017”. The actual date is still in the air. The courageous part of the Budget is the proposed change in financing of political parties to bring in transparency, including the floating of Election Bonds, and the reduction to 25% of tax rates for MSMEs. There is also a higher tax threshold for the lowest among the income tax payers. Both the latter segments are presumed to have been hit by demonetization the most and have been rewarded, consequently.

The Budget has thus made only a 0.34% rise for investments in agriculture, a 0.47% rise in education and a 0.3% rise in health expenditure in terms of GDP for next year. The actual numbers looks more impressive only when they are compared with the year on year rise in budgeted numbers-revised for 2016-17 and budget estimates for 2017-18. These are the sectors where the government needed to deliver on the quality of human capital. In fact data has been bad news for the minister this time- the most tracked budget document, Budget At A Glance, has a typo error for the fiscal deficit for 2016-17 printing it at 3.2%. On close reading, it does not appear a typo. The Medium Term Fiscal Policy Statement notes on page 15 “In nominal Union Budget 2017 terms the GDP growth has been assumed at 11%…in the current financial year even though the CSO advance estimates at 90 basis points higher”. If the higher GDP had been retained the fiscal deficit would have slipped to 3.2%-take your pick.

Beyond the data issue, in the larger picture the minister has been also hamstrung in sops to budget for next year as there is hardly any reduction in major subsidies and a meagre rise in non-tax revenues in this year. A weak base makes it risky to budget for large giveaways, next year. For instance, in 2016-17, the principal reason for the gloom is the Rs 34,373 crore dip in receipts from telecom auctions. On top of that, he had to make provision for a sharply worsening performance by the railways. Its operating ratio has slipped to 94.9% against 90.5%.

Jaitley has tried to make up this shortfall by posting an expected Rs 30,000 crore rise in disinvestments for next fiscal and budgeting for a robust rise in tax revenue. In the current fiscal, the tax GDP ratio has risen to a creditable 11.3% of GDP from less than 10% last year, and the minister expects this to rise to 12.2% of GDP in 2017-18. These are tough assumptions to make for a budget made in a difficult global environment.

These explain why the finance minister has been parsimonious- restricting his benevolence to direct income for salary earners earning less than Rs 5 lakh. But at the same time he has been harsh on unaccounted money- relatively junior tax officials can make enquiries without needing to get clearances from superiors. He has decided to do no harm to the economy when he can’t give it a big push on expenditure front. Or is there a supplementary budget expected after the state elections?

FM inches closer to fiscal targets, bold moves on political transparency