The kind of hype and expectation which is normally generated by any budget in India is tough to meet at the best of times. This year was more so due to the demonetization fallout that many of us were affected by. The price of inconvenience was sought and in many cases loss of business and jobs required some level of reparation. Lack of growth and clear decisions regarding black money and political funding also had to be tackled.
Based on all of this, the foremost question will be whether the FM has delivered or not? I would say that he has done it quite well, even though I feel there was room to do more in terms of personal income taxes. The 5 % reduction on the first slab was good but it should have been followed up with similar reductions in the other slabs. The surcharge on the incomes greater than 50 lacs is keeping with the sentiment that the richer people can afford to pay taxes. With the ongoing elections, this is something I can understand, though I do not agree with the approach.
Taxation and black money have been the recurring themes in our economy and polity in 2016 and the FM did a commendable job here. Firstly, he addressed the issue of poor tax compliance and brazen tax evasion in India – it is like an elephant in the room, everyone knew about it but no one mentioned it so far. The FM has put the numbers in context – only 1.7 lacs people saying that they earn more than 50 lacs is abysmally low. With the event of demonetization and the cash being brought into the banking system now, there is real hope that people who had stashed away their ill gotten wealth will now have to face the music. If they declare through IDS 2 then they pay 50 % tax and another 25 % as deposit for 4 years. In case they choose to just take a risk, they will definitely get caught and end up paying 82.5 % tax and in addition get a possible jail term.
As far as the growth part is concerned, the FM has avoided some potentially poor decisions like taxing capital gains on equity etc. On the other hand, reduction of LTCG tenure on property capital gains, shifting the base year to 2001, giving 1 year relief to builders on deemed income will energize the RE sector. With the earlier incentives on housing loans announced by the PM this gives a good fillip to the housing sector, which was much needed.
Agriculture has got a lot of attention in this budget and that is good given a lot of our people depend on it even today. Improvement in agricultural production and rural income will also be able to drive consumption which is vital for corporate growth. We also need to remember that resources are needed here far more, than people like us need it.
The corporate tax relief to companies doing revenues of less than 50 crores in the year 2015-2016, will help the earning of these companies next year. This will be a good push to the elusive earning growth that we have been waiting for. This reform is a harbinger of more things to come and will encourage buying in our stock markets. The fiscal deficit being on track will increase the confidence in the India story as far as the Rating agencies are concerned. FII buying will return and the general mood of our markets in 2017 will be upbeat, though there will definitely be periods of corrections.
Some other good things in the budget was the wait for GST, instead of trying to tinker with Service tax or Excise for 3-4 months. LIC coming up with a 8 % scheme for senior citizens, Companies like IRCTC going public, Safety fund for the Railways, divestment through CPSE ETF next year too are all good measures. Transformation to the Digital economy by stopping cash payments beyond 3 lacs is an excellent idea.
The political funding cap will reduce the impact of goons in our political syatem and this will have the best results in the near future. On the whole, this is definitely a budget in the TEC mode – India is well on the way to Transform, Energize and Clean.