An Outlook Budget 2016” is an effort to provide understanding of the Budget 2016 in form of handy An Outlook Titlebooklet.With big investments in the rural sector and a break for small tax payers, the Hon’ble Finance Minister Mr. Arun Jaitley’s Budget 2016 was largely pro-rural and pro-poor in an attempt to achieve all-inclusive growth of economy.FM in his third budget, took on both the fiscal and physical health of the nation by setting the fiscal deficit target for next year at 3.5 percent of GDP and promising to deal with tax evaders firmly.

“Prudence lies in adhering to fiscal targets,” FM said Budget sets three priorities as: strengthening India’s firewalls by ensuring macroeconomic stability and prudent fiscal management; driving growth through domestic demand; and reforms to boost economic opportunity.The government has done a fine balancing act and maintained its credibility by sticking to the Fiscal Responsibility and Budget Management (FRBM) Act-mandated target of bringing down fiscal deficit to 3.5% of GDP in fiscal 2017 after having met the 3.9% target for fiscal 2016. The odds are all too visible. The economy faces global headwinds even as domestic private investments are weak. There is a step-up in revenue expenditure on account of the Seventh Pay Commission (SPC)and One Rank One Pension (OROP) recommendations. The rural sector, too, is in need of a heavy booster dose after two successive monsoon failures and there is a need to push public expenditure higher. In such a scenario, treading the fiscal consolidation path and honoring the FRBM target may be a tad too ambitious and the likelihood of slippages in meeting the various targets cannot be wished away. Having said that, the benefit the government could have derived by relaxing its fiscal deficit target would not have been large. A relaxation of say 30 basis points (bps) would have freed up only an additional Rs 386 billion.

The Budget places strong emphasis on agriculture, rural economy, infrastructure and social sector.  The resurgence and thrust on the PPP in infrastructure is most welcome. Budget lays down some very clear goalposts on farm income and on village electrification. Various initiatives that have been initiated by the government like Make in India, Skill India and Start Up India will move the economy in right direction. Further relaxation in ease of doing business is positive for industry and entrepreneurs.

Going against the expectations, Finance Minister Arun Jaitley did not allocate more than the proposed Rs 25, 000 crore towards public sector bank recapitalization. Given the structural issues India is facing with respect to public sector banks (that are unlikely to go away with more capitalization), it appears prudent to stay the course of planned recapitalization than throw more money at the problem in the failed hope that that will return them to health.

Overall the budget proposals are in line with the development priorities of the nation. The Finance Minister has made a concerted effort to pump money into the rural economy and the infrastructure sector. This will yield dividends which will in turn lead to greater demand and employment generation over time. This is growth oriented Practical, Pragmatic and Progressive Budget which is excellent inlong term perspective.

Some of the recommendations of the R.V. Easwar committee to simplify income-tax laws including rationalization of tax provisions were introduced. The Union budget sought to reform the country’s taxation system and thereby improve the ease of doing business. Budget introduced several steps across direct and indirect taxes to reduce disputes, clarify existing laws and free up money locked in litigation. He offered a way out to end tax disputes arising from retrospective taxation of capital gains, presented the road map for phasing out corporate tax exemptions, announced a slew of measures to reduce tax disputes (especially in areas such as transfer pricing and indirect taxes), and deferred implementation of POEM (place of effective management) rules by another year.

The further amendments were made to crackdown the domestic and foreign black money reiterates the current Governments’ commitment to curb black money.

This handy version of the Budget 2016 is an attempt to crystallize the provisions of the budget for the reader.

Click on “An Outlook Budget 2016” for full booklet.

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