Finance Minister Arun Jaitley presented the Union Budget in Parliament on Monday. As he began his speech, Jaitley said the Indian economy has held strong despite a global slowdown, adding that GDP growth has accelerated to 7.6% and CPI inflation has come down to 5.4%. Forex reserves are at the highest ever levels – $350 billion, he said.
The Centre proposed to keep the fiscal deficit at 3.5% of GDP in 2016-17, down from the estimation of 3.9% for the current fiscal. The total expenditure in the 2016-17 fiscal is Rs 19.78 lakh crore. Of this, Rs 5.50 lakh crore would go towards planned expenditure, with the remaining Rs 14.28 lakh crore allocated for non-planned expenditure. The revenue deficit for the current fiscal has been pegged at 2.5% of GDP, better than the budgeted 2.8%.
The budget focused on the rural sector, with the government setting aside as much as Rs 87,765 crore for rural development. Out of this, Rs 38,500 crore has been allocated for the Mahatma Gandhi National Rural Employment Guarantee Act this year – the highest ever allocation. Jaitley also said the government is committed to achieve 100% village electrification by May 1, 2018. The Centre also announced an allocation of nearly Rs 36,000 crore for the farm sector, and raised the agri-credit target to Rs 9 lakh crore for the next fiscal. Rs 15,000 crore were set aside for interest subvention on the farm credit, while Rs 5,500 crore went towards the new crop insurance scheme.
The finance minister also announced a massive mission to provide LPG cylinders to 1.5 crore households below the poverty line. Rs 2,000 crore has been allocated for this. Rs 55,000 crore has been set aside for developing roads and highways. The total investment in the roads sector is Rs 97,000 crore. The total outlay on roads and rail will be Rs 2.18 lakh crore.
Jaitley announced that the personal tax slabs would remain unchanged, and presented a series of tough breaks for the rich in the form of surcharges and taxes on luxury goods. He said that the net revenue generation through taxes will be Rs 19,610 crore. The Sensex reacted to his taxation reforms by dropping by 600 points.
Here is what happened when Jaitley presented the Budget:
12.40 pm: Jaitley says his direct tax proposals will result in a loss of Rs 1,060 crore, while the indirect tax proposal will result in gains of Rs 20,760 crore. This means the net revenue generation through taxes will be Rs 19, 610 crore. Jaitley says that in the midst of a weak global economy, he hopes to protect the country, its farmers and its social sector to create a stable economy. With this, Jaitley has tabled the Budget, and the Lok Sabha has passed the Finance Bill 2016.
12.37 pm: The government is seeking to simplify and rationalise taxes. There will be 11 new benches for tax tribunals.
12.31 pm: And there goes the Sensex:
12.30 pm: Tax evasion will be countered strongly, says Jaitley. Penalty for underreporting income will be 50% of the tax, and it will be 200% for not paying taxes. There will be a limited period compliance window for taxpayers to declare undisclosed income. The declarations will have immunity from prosecution. India will not resort to retrospective taxation in the future, and tax arrears can be paid in lieu of interest liabilities in retrospective taxation cases.
12.28 pm: The government plans to increase excise duty on tobacco products other than beedis by 10-15%.
12.25 pm: Jaitley is announcing higher taxes for the rich - the surcharge for those with an income of Rs 1 crore has been raised from 12% to 15%. There will also be double taxation of dividend earned if you earn more than Rs 10 lakh. A 1% service charge will be on purchase of luxury cars over Rs 10 lakh and in-cash purchase of goods and services over Rs 2 lakh. However, no changes have been made to existing income tax slabs.
12.23 pm: A series of measures have been announced to make housing more affordable. This includes additional exemption of Rs 50,000 for housing loans up to Rs. 35 lakh, provided the cost of the house is not above Rs 50 lakh. No service tax for houses being built in areas of lass than 60 sq m.
12.20 pm: Pension schemes – A withdrawal of 40% of the corpus tax exempted at the time of retirement under the National Pension Scheme. The annuity fund will also not be taxable. Service taxes will be reduced for general insurance schemes under Niramayi Swasthya Bima Yojana.
12.18 pm: The Sensex is reacting to Jaitley's speech:
12.15 pm: Corporate tax rebate rates – New manufacturing companies (established on or after 1 March, 2016), will be given the option of being taxed at 25% + surcharge + cess. The government will also reduce tax rates for small enterprises (under Rs 5 crore), to 29%. Start-ups will be assisted by 100% profit deduction for three out of five years. The government will introduce a bill to amend the Companies Act for ease of doing business, will enable the registration of companies in a day.
12.10 pm: On personal tax reforms, Jaitley has proposed the ceiling of tax rebate under 87A from Rs 2,000 to Rs 5,000. He has also changed the limit under the HRA scheme, rent deduction has been raised from Rs 24,000 to Rs 60,000.
12.09 pm: The Seventh Pay Commission - A committee has been constitute to examine the commission's report, and interim provisions have been made in the budget to account for the commission. Initial sum of Rs 100 crore each for the birth anniversary of Pt Deen Dayal Upadhyaya and Guru Gobind Singh.
12.05 pm: Jaitley is now addressing the fiscal situation. The fiscal deficit target has been set at 3.9% of the GDP. The total expenditure in the budget is Rs 19.78 lakh crore of which Rs 5.50 lakh crore is under planned and the rest under non-planned expenditure. The increase in planned expenditure is 15.3% more than last year. Planned expenses are under sectors such as agriculture, minorities, infrastructure, women's development, social sector.
The government wants to focus on revenue and capital classification of government expenditure. They also plan to do away with the planned and non-planned classification next year. The government has improved upon the revenue deficit target: from 2.8% to 2.5 of the GDP.
Noon: IT-enabled government processes will be enabled to boost the ease of doing business. Public money should reach the poor, and the government has started three initiatives to achieve this, Jaitley says: First, a targetted delivery of subsidies and benefits using Aadhaar, though Aadhaar does not confirm citizenship or domicile. Second, a direct transfer policy for fertiliser subsidies. Third, automation facilities will be provided to 3 lakh fair price shops.
11.56 am: The government plans to revamp public sector banks through the Indradhanush scheme. The banks are trying to focus on recoveries and reviving stalled projects. Rs 25,000 crore has been allocated towards recapitalisation of the public sector banks, and additional finances will be provided if required.
11.53 am: A comprehensive code to deal with bankruptcy in banks will be presented as a bill. The RBI Act 1934 is being amended to provide a monetary policy committee.
11.50 am: The government plans to open up more countries and products in its FDI policy. FDI changes will be made in insurance, pension funds, asset reconstruction schemes. It also wants to boost exports. 100% FDI in the marketing of food products produced and manufactured in India, giving an impetus to farmers and the food processing industry, creating more jobs.
11.48 am: The government will incentivise gas production to achieve self-sufficiency in oil and natural gas resources. The government has put forth a proposal to this effect, and hopes to bring considerable investment in this sector. The government has achieved the highest coal production in two decades. The government plans to diversify power sources for long-term stability. It is trying to augment investment in nuclear power generation.
11.43 am: Rs55,000 crore for roads and highways. The total investment in the roads sector is Rs97,000 crore. The total outlay on roads and rail will be Rs 2.18 lakh crore. The total outlay for infrastructure now stands at Rs 2.21 lakh crore. Road transport in passenger segment will be opened up to the private sector.
11.42 am: The government wants to simplify the retail sector – to help shops remain open all seven days a week, while also protecting workers' rights to weekly holidays.
11.36 am: A higher education financing agency, with Rs 1,000 crore earmarked, has been set up. Through the National Skill Development Mission, the government will develop 1,500 multi-skill training institutes across the country. Rs 1,700 crore has been allocated for this, to bring skills to 1 crore young people over the next three years.
11.34 am: A National Dialysis Service Programme, using a PPP model, is being announced. The Union Cabinet has put aside Rs500 crore for the Stand-up Indian scheme to empower SC/STs and women entrepreneurs.
11.32 am: Jaitley announces a massive mission to provide LPG cylinders to 1.5 crore households below the poverty line. Rs 2,000 crore has been allocated for this. He says this will empower women, provide jobs for rural youth in the LPG supply chain. He also thanks the 75 lakh middle class families that have voluntarily given up their cooking gas subsidy.
11.30 am: The Budget has put aside a total of Rs 87,765 crore for rural development.
11.27 am: Rs 9,000 crore has been allocated to the Swachh Bharat scheme, the government's flagship cleanliness programme.
11.25 am: Rs 38,500 crore has been allocated for MNREGA schemes this year, which Jaitley says is the highest allocation by any government so far. Jaitley says 18,542 villages were not electrified on April 1,2015. By February 23, 5,542 villages had been electrified. The government plans to achieve full electrification by 1 May 2018, and Rs 8,500 crore has been allocated to the Deen Dayal Upadhyaya Gram Jyoti Yojana.
11.20 am: The government plans to promote organic farming. There will also be a unified agriculture market e-platform. It announced allocations of Rs 35,984 crore for the farm sector.The government has allocated Rs 19,000 crore for the Pradhan Mantri Gram Sadak Yojana. Rs 5,500 crore has gone to the Prime Minister's Fasal Beema Yojana. A dedicated long term irrigation fund will be created in NABARD with a corpus of Rs 20,000 cr, reports PTI.
11.15 am: The finance minister is outlining the measures in place for agricultural and farmers' welfare. He says we need to think beyond food security, and move to income security for farmers. The government plans to double the income of farmers by 2022, an announcement Prime Minister Narendra Modi made yesterday.
11.12 am: Jaitley says the Indian economy has held strong despite a global slowdown, pointing out that GDP growth has accelerated to 7.6% and CPI inflation has come down to 5.4%. Forex reserves are at the highest ever levels — $350 billion, he says. While the next two years will be challenging, the government plans to focus on the rural and social sectors, infrastructure and recapitalization of banks. According to Jaitley, the pillars of the Budget this year are: agriculture and farmers' welfare, the rural sector, the social sector including healthcare, education, skills and job creation, infrastructure, financial sector reforms, ease of doing business, fiscal discipline, tax reforms to reduce the compliance burden.
11.00 am: Arun Jaitley begins presenting the Budget.
10.45 am: The Cabinet has cleared the Budget, and it will be presented in Parliament shortly.
10.00 am: Top Union Ministers, including Arun Jaitley, meet to discuss the Budget before it is presented. The Sensex opened cautiously on Monday, and later fell by 59 points in early trade ahead of the government's announcements.