It was the only and the first budget ever in the history of independent India to be presented on the 1st February. Finance Minister Shri Arun Jaitley on 1st of Feb., 2017 presented the Union Budget for the year 2017. The broader picture is that there is much that is reasonable in Union Budget 2017 and nothing that does any damage. However, there are some negatives in the recent budget and some key misses which should be there in the budget 2017.
Some major negatives in current Financial Budget 2017
- Excise duty leviable on tobacco has been drastically raised to 8.3% from the existing 4.2% almost doubled. Likewise, the excise duty on pan masala or gutkha has also gone to 9% from 6%.
- The government plans to save electricity one side and on the other side rather than encouraging the use of LED bulbs the budget has imposed a levy of custom Duty of 5% on raw materials used in the manufacturing of LED lights.
- The Printed circuit boards of mobiles which are used in the manufacturing of mobile handsets now will attract 2% levy of Customs Duty. So far, there were no duties levied on such items.
- To encourage the digital India campaign and also to curb the black money, Government has decided to prohibit any transaction above Rs.3 lakh in cash. However, this move will be succeeding only if the administration is free from corruption.
- No decline in corporate taxation – No deduction has been provided to big corporate, earning more than 50 crores. In reality, the Big corporate is the actual job creators and suffering a huge setback due to the demonetization. The big corporate were hoping for something good.
- No Action has been taken to increase new jobs– the biggest Issue in the country is crores of unemployed youth. Govt. has failed to provide adequate employment in its last 2 years and even this year there was a lack of vision in this regard.
- This finance budget 2017 has failed to provide any positive signal to industry and to the market as a whole (Not talking about Household ).
Some major misses in Current Budget Proposals 2017
A missing constituent on the income tax side is the transformation of tax administration process and procedures to improve legal compliance. The finance minister precisely pointed out that there are some people in the country declaring reasonable income. T
he Financial Budget 2017 takes credit for an increase of 25 percent in revenue from individual income tax, which is completely sensible if we look at the potential. But due to the absence of tax administration reforms which encourages assessee to comply, it will be hard to safeguard them from what is in general called “tax terrorism”.
The committee (Parthasarathi Shome committee) had made numerous recommendations on “tax terrorism” couple of years ago, but barely any of them have been implemented. Focusing high revenue goals without transforming tax administration will only harass the genuine taxpayers.
One of the disappointing features of the latest Financial Budget 2017 is the absence of a convincing and credible plan to certify a revival of bank lending. The commercial credit expansion by banks or other financial institutions has considerably slowed down, and if we exclude personal loans, lending to the Indian market is actually contracting! There is no such a way that the Indian economy can get back to 7.5% annual growth without a healthy revival in bank lending.
The main problem regarding bank lending is that state-owned banks don’t have adequate capital to sustain higher lending. A reliable and credible proposal for re-capitalization should be there, but this budget provides only Rs10,000 crores, which is utterly inadequate, based upon the estimated need made a couple of years ago.
Reducing the income tax rates in the first slab from 10 percent to 5 percent has been extensively welcomed by the industry and the people of India, but it is regretted to say that it is not well enough conceived.
As of now, we have a very twisted rate composition, with the first slab, from the first slab of 5 percent (2.5 lakh to 5 lakh) a sudden jump to 20 percent (Rs5 lakh to Rs10 lakh) and 30% for incomes above 10 lakhs. Moreover, it also introduced a complicated new surcharge of 10 percent for the assessee having an income between Rs50 lakh to the Rs1 crore, altogether with a surcharge of 15 % for incomes above Rs1 crore. The surcharges levied on the income should have been abolished, since they disobey the spirit of accommodating federalism as they are not shared with the states.
A major area of weakness in this Budget 2017 and in recent budgets is the comparative neglect of capital investment. The recent edition of NERI Quarterly Economic Observer has highlighted the want for a hefty increase in capital investment. The Indian Government is planning to increase level spending levels by the year 2021. The level of public capital investment needs to be doubled at least.
Related Read- High and Lows of budget 2017