The much awaited Union Budget for the Financial Year 2017-18 has finally out today on 1st February 2017. The last quarter of previous year had experienced a lot of ups and downs in the economy. The biggest event, demonetisation had happened last year on 8th November 2016. Within few days the economy has changed drastically due to demonetisation. There are multiple reasons why the entire nation was waiting for Union Budget this year.
Finance Minister Mr. Arun Jaitley has started his budget speech with the development that had taken place in the last 2 and half years. According to the FM, the country has developed largely in last few years. Since the Modi government has come to rule, all the sectors including primary, secondary and tertiary, have improved big time. IMF report says that India has been the fastest growing developing country at this moment. He announced Lits of Schemes in Budget 2017.
This year the honourable Finance Minister has set an agenda to provide transform, energise and clean nation which will be called TEC India. On the basis of that 10 distinct areas have taken into consideration. According to the FM, the main aim of the government is to provide uplift standard of living, better lifestyle, better income and more facility to the common and underprivileged people.
The main 10 areas that FM has targeted are:
- Farmers: In past 2 and half years the Modi government has introduced as well as retrieved many a schemes for the farmers. This year the budget allocation for this schemes have increased by 10-15%. The ministry also said that in the next 5 years the income of the farmers will get doubled. The total allocated budget in primary sector is Rs. 11, 87, 220 Cr.
- Rural Development: Under Rural Development, Jaitley assured that in the coming financial year the roads will be developed under PMGSY. The scheme is already implemented and the construction is speeding up with time. On the other sanitisation has also risen up to 60% from 42%. It will increase in future too. Electricity in all the villages by 2018, mini labs in the fields for soil testing and other facilities will be provided.
- Youth: For the youths, the nation will provide more improved education, especially those areas where no school is found. There will be Sankalp through which youths will be able to get market related training. Skill oriented quality education will be provided to the youths for more job opportunity and career goals. For sankalp Rs. 4000 Cr have been allocated.
- Poor and underprivileged: For the poor and underprivileged people FM allocated 1, 84, 632 Cr for their better health and living standard. Elimination of diseases like tuberculosis, setting up of new AIIMS hospitals and much more health benefits will be provided.
- Infrastructure: This year the budget allocated for Infrastructure has created much buzz as the figure is a record breaking figure. Rs. 3, 96, 135 Cr has been allocated for the highways, roads and bridge developments across the nation.
- Financial Sector: Steady growth and stability will be maintained. The foreign investment board has been eliminated. Also there will be relaxation in FDI policies. Rs. 10000 Cr will be given to the banks (PSU) for recapitalisation. If needed government will pay more.
- Digital Economy: Digital India is the step taken by the central government to make a cashless country. To some extent the nation get succeeded in this. Introduction of BHIM app made it much easier. A couple of new schemes will also introduce to promote BHIM App in near future.
- Public Service: It will be more effective and easier. People who have to travel a mile to get to passport office will be benefitted as there will be front offices in various areas. LPG name transfers and other services will also be available easily.
- Prudent Fiscal Management: The focus will be given to the capital and revenue expenditure in this FY2017-18. Fiscal Deficit for the next financial year 3.2% in 2017-18.
- Tax Relaxation: One of the main points from this budget that everyone is looking up to. According to the FM people who are salaried borne the maximum burden of tax. This year the tax rates for the lower slabs have been cut down to 5% from 10%. The upper slabs are same as before. Annual income from Rs. 2.5 Lac to Rs. 5 Lac will have to pay only 5% tax. Entrepreneurs who have annual turnover of Rs. 50 Cr or less will have to pay tax at 25% instead of 30% now. Start-ups on the other will enjoy tax holiday for first 3 years of starting up their business.
- This is the first time that Railway Budget 2017-18 has been announced along with Union Budget. It will be a historical year as none of the FMs earlier done that. The total allocated budget for Railways is Rs. 1, 31, 000 Cr for the next FY2017-18.
- According to the plan, 25 more trains will be introduced along with 500 stations that will be disable-friendly. On the other 3500 km tracks will be constructed in the next one year. By 2019 there will be 7000 solar powered stations across the nation.
- This year the budget allocation for the railways has increased by 22% than the previous year. However the fare of the coaches will be same as basics.
- To encourage the digital India surcharge in online ticket booking has been abolished completely. There are plans for Metro Railways as well. The new plans for Metro will be published soon. This new plans will lead to more job opening for the youth.
Other points to be noted:
- There are some other points that must be noted. Such points are not more than Rs. 3 Lac will be allowed for cash transactions. Above 3 Lac digital mode of transaction must be used.
- In past year the tax revenue (net) had grown largely due to several reasons. Nearly 17% growth had shown in tax revenue section. This year along with tax rates the custom duty on LNG has cut down to 2.5% from 5%.
- Jaitley announced that to take a step forward towards political reforms, there will be an upper limit in accepting cash as donation. Only Rs. 2000/- (max) can be accepted as donation. Rest of the donation amount must be received through cheque or electronic transfer.
Pre Budget predictions
The 2017 edition of the India budget will be revealed on February 1. It is next to impossible to try and figure out precisely what will be on the budget. This is especially the case today as demonetisation continues to make a significant impact on the country. The changes in the national economy have left India in some form of uncertainty as there is no telling how different rules may change.
Budget 2017 Highlights Summary
Many of the points on the India Budget 2017 are expected to entail schemes and incentives to help improve upon how the national economy works. Some other points are anticipated to be about improving how homes are built and how people in many rural parts of India can receive assistance and support from the government.
All plans listed from this point forward are predictions as to what may happen within the India Budget 2017. These are based heavily on recent trends, governmental goals and many other factors that are directly impacting the Indian economy.
In addition, these plans are especially subject to change. With a great deal of uncertainty surrounding the international climate, it is impossible to try and tell how the budget will be developed and what possible changes will be announced.
A Focus on Growth
The key part of the India Budget 2017 will entail a focus on the growth of the national economy. This includes support for the public sector and various industries. The goal will be to improve upon the gross domestic product of India. This includes growth to support the expanding population of the country and to increase the overall influence that the country has among others in the world.
The GDP has been rising in India in recent time. During the second quarter of the prior year, the GDP growth rate increased to 7.3 percent. This is a small rise over the 7.1 percent from the past quarter. However, the growth has been limited as demonetisation has directly impacted the national economy.
The GDP in India has been much higher than what it is in Pakistan and other countries around India. However, with competition being a real challenge, there is a chance that the GDP growth in India will become stagnant. It may also decline over time. The budget will work to prepare a stronger plan for the economy to improve upon how the GDP works and how it will grow over time.
Helping the Manufacturing Sector
The manufacturing sector in India has been growing in size over time. The Make In India campaign has especially encouraged many international businesses to get their manufacturing services out to India. However, there are real concerns over how the manufacturing base in India works and how many people are able to fill jobs.
About 1.5 million jobs are needed in the manufacturing sector each month. This equates to close to twenty million jobs per year. As a result, some added contributions to producing new jobs in the field are needed.
During the past year, the output of products in India declined by 0.3 percent. The industry is operating at 75 to 80 percent capacity, thus keeping outside companies from being interested in doing business in India. New policies might have to be added to the budget to improve upon how the Make In India campaign works.
Controlling the Taxes for Manufacturing Needs
The taxes around India have been relatively high in some segments. The Minimum Alternate Tax has gone from 7.5 percent in 2007 up to 18.5 percent. This in turn has caused the manufacturing segment to lose money. If the segment continues to shrink, the threat of unemployment could increase.
The MAT may be reduced in some form. The MAT could be scaled to a uniform setup for how money is to be handled. This is not guaranteed to work as there are concerns over how well the tax rate can be changed. If the tax rate cannot be easily fixed, the MAT could be reduced to a much more manageable level. This could entail being at a level of 7 to 10 percent.
Some spending for added manufacturing jobs may also be added to further promote the Make In India program. This may involve jobs in rural parts of the country. The total amount of spending needed could be rather high.
Eliminating the DDT?
The Dividend Distribution Tax or DDT has added a significant amount of added expenses to corporate entities. There is the possibility that the DDT could be eliminated altogether. There is also the chance that an exception limit may be established. In this limit, about 10 percent of profits can be held not liable for any DDT charges. Some reviews may be used to determine how eliminating the DDT will impact the economy but there is a chance that it could be weakened in some way.
The DDT has entailed high charges for many wealthy businesses but it has also harmed some smaller entities on occasion. With the DDT, many smaller businesses are forced to spend more money than necessary on some expenses. Eliminating the tax could help although some limits may also be used.
Demonetisation Leads to Lower Taxes?
The demonetisation process has resulted in significant collections of money from the banks around India. This includes working to keep the cost of black money and laundering from being a threat.
As the risks that come with physical money are reduced, the threat of significant losses from corruption will be mitigated significantly. Therefore, the savings could be passed on to the people of India. The extent to how lower taxes would be introduced is unclear but it would be welcome to many of the poorest residents of India. These include people all around the rural parts of the country.
The tax structure around all parts of India may especially change. This comes as the tax system around the country is relatively uneven with certain segments being taxed more than others.
Working To Handle Demonetisation
While much of the money gathered during the demonetisation process has been accounted for, some additional forms of support may be required to keep the demonetisation process in check. There are many things being promoted as a means of handling the demonetisation system:
- The MNERGA act may be improved upon. This is to enhance how the threat of demonetisation impacts rural markets. Much of this is to improve upon how people in rural areas can receive added employment opportunities.
- A direct benefit transfer system may also be offered in the future. With this system, at-work benefits for employees may be sent directly to bank accounts without any cash being transferred. This is designed to enhance how businesses work with the growing cashless ecnomoy.
- Some smaller retailers may receive tax incentives to add cashless payment systems. They may be provided with funds to pay for many forms of technology like card readers and broadband systems. With these, such retailers will be linked up to the appropriate payment systems.
- Benami transactions will also be heavily tracked. This refers to payments where the benefitting party is different from the party that purchased something. The goal is to eliminate benami transactions or to significantly reduce how often they occur.
The production of new online payment methods, access to more applications for payments and education for cashless transactions is also being tossed around. Some added funds would have to be used to support all of these services. This could be a necessity due to how quickly India is moving into its cashless era of business.
There is a need for new roads, airports and other features for transportation around India. This includes support for added power connections. The infrastructure will have to be improved upon to make it easier for people to get around the country and to have access to more modern services. More importantly, support for online connections is also required to improve upon how cashless transactions may be used.
Private investments on infrastructure costs in India have been higher than what the public investments entail. Still, private investments have remained rather consistent with no real sign that such spending will increase. Therefore, added funds may be provided in the budget to add public funds for roads and other services.
In 2015, the private investments in infrastructure rose by around 15 percent. This is compared to around the 3 percent increase in public investments. The totals have been rather consistent in the past few years. Although there have been increases in infrastructure totals in recent time, there might be a need for the public investments to increase to offset any concerns over the spending process being reduced in some areas.
The improvements to rural infrastructure may especially make a difference in how the nation evolves. The overall goal is to get added power sources in many rural parts of the country while also supporting more sanitation services. The addition of various schemes in recent months has helped to get more money invested in improving conditions in rural India. Some added support is expected to be included to further improve conditions in many rural parts of the country.
Worries About Oil
Oil values have gone up in recent time around India. Indian crude oil has gone from $28 per barrel at the start of 2016 to $53 per barrel just recently. This is according to the petroleum planning and analysis department of the oil ministry.
With the risk of oil prices continuing to rise due to demand and market uncertainties, there is a chance that the public could be harmed. Also, with India importing more than two-thirds of its oil, the added prices for importing oil could be a threat. There is also the ongoing volatility of the oil market in terms of values and other critical factors that directly influence how oil is produced and sold.
The India Budget 2017 may include several solutions to remedy this problem. These include solutions like adding extra charges to countries that want to take out oil from India. This could be used to help with keeping the cost of oil down for residents of India and to add a bit of extra revenue.
The goods and service tax may also be brought to a more uniform level. This is to keep the expenses associated with the tax from being harder to handle than necessary. By using a better tax structure, it might be easier for charges on oil to be consistent with different parties or for a more organized system in terms of who might be charged the most money.
The additional help for getting oil functions taken care of around India will be essential to watch for. This comes amid many considerations relating to how oil values may change. The uncertainty in the oil industry is consistent regardless of the market so it is important to watch for how such changes might come about.
The Construction of Homes
New homes have been built over the years in many rural parts of India. This is to support the country’s initiative to provide affordable housing to all residents in the country. The Pradhan Mantri Awas Yojana has especially been critical to the development of new homes. The government is hoping to build 7 crore homes before 2022.
The new budget is expected to have several measures designed to help pay for the new homes:
- Added funds will be provided through the public sector. This includes funds that may come directly from the government based on what it decides to add. This could come from new taxes on some of the wealthier parties in the country.
- The corporate tax rate is expected to remain consistent. The tax code may be simplified and potentially clarified to list new information on different types of savings programs for businesses to use.
- Added incentives may be offered to some outside parties. These include foreign investors that will to support the process as an investment option. Some tax cuts or exemptions may be included although they might be limited.
With more people living in India than ever before, the process of aiming to get homes for all by 2022 may be challenging. The India Budget 2017 is expected to address this point.
Oil and Gas Help
Some added investments may be placed into the oil and gas sector. Interest rates would have to go down as a means of getting people to consume these necessary materials. Such rates may also decline to improve upon the competition among different businesses within the same industry.
There are many considerations that may be introduced into the India Budget 2017 with regards to the oil and gas fields:
- Added funds for new jobs may be provided. The number of people working at CPSEs has remained relatively consistent at around 110,000 over the past few years. Additional positions relating to working in oil and gas fields are expected to be produced.
- Rates on outstanding loans in the industry may be eased by a bit. Many banks have been rather hesitant to offer new loans within the industry. By improving upon how existing loans can be paid off, it should be easier for banks to take care of new loans in the future.
- New financing would be required for insurance and pension funds. The finances would be used to cover the retirement incomes of those in the industry and to also protect people from losses in the event of injuries sustained while working.
The added financial support for the industry is being produced to improve upon how the oil and gas fields are maintained, operated and supported. This especially comes amid a need to get more energy out to a larger number of people all around India.
Help For Education
The education sector is one of the fastest-growing segments of all India. However, much of the spending on education in India has shifted towards the infrastructure part of developing the country. There could be changes to improve upon how education spending works in the coming year.
There should be a plan to get more teachers employed. About 43 percent of the Indian population from 5 to 14 years of age study in the Uttar Pradesh, Rajasthan, Madhya Pradesh and Bihar. These states have the lowest student-to-teacher ratios in the country as well as some of the lowest literacy and school enrollment rates in the country.
Added support is expected to be poured into the education sector through the India Budget 2017. Much of this is to improve upon how students in many poor parts of the country can get the support they require while also getting more teachers hired.
The World Class University plan and the Higher Education Financing Agency are both expected to get some added funds. The WCU and HEFA initiatives are aiming to get the twenty higher education institutions around the country to be among the top-100-ranked schools in the world.
Many additional plans are expected to be included in the budget for education purposes:
- Loans are to be provided to schools to help with improving upon their infrastructure. This includes support for the research and development of new technologies that may be offered in schools.
- Added funding for scholarships for the most talented students is also expected. The Prime Minister’s Research Fellowship will be supported the most.
- The digitalization of schools around India is expected to continue. This includes not only adding more computers into classrooms but also improving upon how people can pay for educational services through digital payments.
The total amount of money added to the India Budget 2017 for education is unclear at this moment but analysts suggest that the spending on education could increase by at least 10 percent.
Changes In Military Spending
In the last three years, spending on the Indian military has increased by about 10 percent per year. The defence sector is expected to continue to receive added funds. Much of this comes amid concerns that the miiltiary is not fully modernized. Added spending for new vehicles and other materials is expected in the coming budget.
The hope is that the part of the defense budget dedicated to the modernization of the military will increase. Although the military expenditure went from Rs. 229 lakh crore in 2015 to Rs. 2.58 lakh crore last year, the totals for modernization declined. The totals for that part went from Rs. 95,000 crore to around Rs. 87,000 crore. The possibility for spending on the modernization of the military is strong.
Although, the spending the military may need to increase as a means of keeping up with China and Pakistan. Those two countries have spent more money based on their GDP on military expenses than what India has spent. This especially comes amid concerns over the security of India.
The potential for the military to expand in terms of manpower may also be a consideration. With several crore of people active in the military, there is a possibility for more people to join the military. With international uncertainty over different conflicts and disputes around the continent, there is a chance that the budget will include some money earmarked to help with improving upon how the budget works.
How the Auto Industry Will Be Impacted
Several new plans for the auto industry are expected to be found in the India Budget 2017. The goal is to create a more modern approach to the industry and to provide people with added vehicles. The new plans being promoted within the industry include the following key points:
- The excise duty taxes will be lowered. This will create a cost structure that is more consistent around the entire industry. The cost to produce vehicles should decline, thus potentially resulting in cheaper vehicles for the public.
- A scrappage scheme will be produced for vehicles that are at least ten years of age. This could entail financial incentives to people who get rid of their older vehicles although the terms may vary by each car being scrapped.
- Auto loans will be lower interest rates. This reduces the cost associated with getting a loan. Much of this is for the benefit of rural residents who otherwise cannot afford auto loans.
- Lower taxes will also be imposed on hybrid and electric vehicles. With pollution being a problem around much of India, incentives are being offered to improve upon how such vehicles are made.
The growth in the auto industry will especially be vast as the infrastructure for the country will expand. Added automobiles will be required although there is a need to get newer vehicles out on the roads as part of the ongoing modernization of the country.
Enhancing the Tech Industry
One key aspects of the Indian economy comes from the added dependence on the technology industry. India has become a major player in the IT and telecom world. The need to get more people around India online has especially become a significant concern amid the added dependence in the country on cashless payments.
The IT industry is hoping that a sizeable portion of the India Budget 2017 will be dedicated to supporting that field of work. In particular the industry is aiming for added spending on cyber security. This includes at least 8 percent of the money being sent to the IT sector being spent on security measures.
There is also a demand for added broadband support. With the Indian economy moving more towards a cashless system, there is a need for broadband connections to be set up around more parts of India. The production of new cellular towers around India is expected to take place to get signals out to more rural parts of the country.
New hardware products relating to the field are expected to be added in the future. This comes amid problems relating to some telecom and IT hardware used around the country being outdated. As the tech sector continues to evolve, India is aiming to get its materials to be up to date and fully functional. This comes along worries that many tech items are becoming obsolete faster than they used to be.
Making Cellphones In India
India has become one of the most popular markets in the cellphone industry. Many handset makers operate in India and import their products to India and many other countries. The industry has slowed down by a bit due to the goods and service tax and demonetisation.
The India Budget 2017 is expected to include incentives to get handset makers to continue making products in India. There are many points expected to be announced:
- A ten-year tax holiday will be provided to local manufacturers. This will entail the GST regime being heavily minimized.
- A cashback incentive will also be expanded. The Merchandise Exports from India Scheme has a 2 percent cashback point at this moment. This total will be increased to 5 percent cashback on manufacturing costs and other key expenses that qualify.
- The duty on the import of capital goods used when making handsets may also be eliminated or reduced significantly. This comes as it is often difficult to predict what particular shipments will be made available to people.
Support For Pension For More People
Some additional pension support will be provided to many people in the Indian workforce. One example comes from the railway porters getting help from a new cess. A cess of 10 paisa per ticket is expected to be promoted. This will cover the porters around the rail system with help through social security. It will be supported by EPFO, a popular retirement savings firm. This would work for about 20,000 porters around India.
This example of the railroad workers is a sample of the pension support that is expected to increase over time. The EPFO and ESIC among other similar parties are aiming to get added social security benefits to nearly 40 crore informal sector workers around the country. Added support from the government is needed to improve upon how well people can get the support they demand.
The desire to expand pension plans around India comes as the workforce around the country is aging. Although the average ages of people in India are younger than what it is like in other surrounding countries, there will be a concern over how retirement spending comes about in the future. As more people near their retirement ages, they will require pensions. The India Budget 2017 could have new spending plans to assist in promoting retirement spending and to help people save money. The ways how such people in the workforce can benefit are unclear at this moment.
Imports on Minerals
The imports on minerals could be impacted as a result of the new budget. The All India Gems and Jewellery Trade Federation has encouraged the government to control import duties. In particular, the import duty on gold and other precious minerals could be cut down to 5 percent.
The current duty on gold is at 10 percent. The GJF states that this is hurting the mining industry and causing an adverse reaction to the economy. By reducing the duty, the costs of running businesses will decline. In addition, the risk smuggling could be reduced. This comes as there is a goal for getting the minerals handled properly.
A goods and service tax of 1.25 percent is also being encouraged for the mineral sector. The GJF wants to use this single tax for the industry to improve how organised it is. This is also to improve upon how compliance works within the market.
All people in India will be looking forward to seeing what will happen with the budget as it is released on February 1. The potential for the budget to be rather high in value is strong. The functions and services that will be covered within the budget will especially be worth looking into as there is a great chance that some significant additions will be made to the budget as more things are covered.