There is little doubt about the basic objective of the 2016-17 budget that is to reach out to farmers, rural poor and small entrepreneurs. Prime Minister Narendra Modi’s political acumen may have influenced key pro-people provisions in the budget more than generally business-friendly finance minister Arun Jaitley ‘s concern for industrial growth and investment. The central plan outlay for agriculture and allied activities to benefit the farm sector has been raised by over 80 per cent in the current budget to Rs. 19,394 crore over the 2015-16 level of Rs. 10,942 crore, accounting for the biggest jump under any sector. Energy, Transport, social services, general economic services, science, technology and environment are other key areas of larger central plan outlays during the next financial year. The resources to be transferred to the states are to go up by only around eight per cent to Rs. 9,37,705 crore in 2016-17. The states’ share of taxes and duties is around 23 per cent, almost 100 per cent more than the central plan’s share.

Finance Minister Arun Jaitley put it straight about the government’s agenda for the next financial year to ‘Transform India’ with nine distinct pillars. They include agriculture and farmers’ welfare with focus on “doubling farmers’ income in five years;” creating rural employment and infrastructure; and covering all under welfare and social services, making India a knowledge-based and productive society with focus on education, skills and job creation. A massive sum of Rs. 2.97 lakh crore will be given as ‘Grant in Aid’ to gram panchayats and municipalities, recording a quantum jump of 228 per cent compared to the previous five year period. Similarly, the nine-point thrust for the government’s tax proposals includes relief to small tax payers; measures for moving towards a pensioned society; promoting affordable housing for the poor; and additional resource mobilization for agriculture, rural economy and clean environment. A modest 0.5 per cent ‘Krishi Kalyan Cess’ on all taxable services has been proposed in the budget, the “proceeds of which would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers.” Similarly, the brunt for resource mobilisation to support agriculture, rural economy and environment will be borne by tax on fat dividend and income earners.

With domestic investment down, the budget relies more on SMEs and foreign direct investment to ‘make in India’ and grow the economy. A host of incentives, including majority control by foreign investors, fresh impetus to foreign portfolio investors (FPI), higher FPI participation (up to 49 per cent) in listed central public sector undertakings’ equity and according ‘residency status’ to foreign investors will be provided to foreign investors to pep up both industrial investment and stock market. The budget depends heavily on FDI for growth in both the manufacturing and services sectors. For the domestic industry, it may appear to be a dull budget. Industry expected a lot from the budget by way of duty reduction and large government and public sector investment in infrastructure. Several domestic industries are reeling under high tax regime and constant threat from cheap imports. They may have to deal with these adversities for some more time.

For all said and done, it is a good budget for rural Indians, the poor and senior citizens, who have long been used to high sounding words from the country’s finance ministers. However, much of the success of the government proposals may ultimately depend on the election results in the five states by the middle of this year. It is a high stake budget for the prime minister and his party. BJP’s political opposition is, naturally, upset, if not concerned. CPI’s Rajya Sabha leader D. Raja’s comment on the budget appears to be most crispy as he found “outside budget, they (BJP) promised a lot to corporate sector. Not evident now. Nothing spectacular in the budget.” A highly pro-industry budget is what BJP’s political opposition banked on to corner the government. It was as much frustrated as the industry and stock market. The latter seems to have guessed it well. The market was down in both pre- and post-budget sessions. (IPA Service)