Pragmatic budget sans ‘big bang’

Falling just short of big bang reforms called for by his own Economic Survey, Finance Minister Arun Jaitley on Saturday presented a Rs17.78 lakh crore (nearly $300 billion) national budget for the next fiscal that seeks to put more money in the hands of the average citizen, tackle the menace of black money more effectively and end an era of "scam, scandal and corruption.”

• More money in hands of average citizen
• Individual tax payers to gain Rs 4.42 lakh
• Devolution to States Rs 5.2 lakh cr in 2015
• Effective measures to track black money
• Scam-free conduct of projects, auctions

In his 93-minute budget speech in the Lok Sabha, the Finance Minister said a new law on black money stashed abroad will call for an imprisonment of up to 10 years on its perpetrators with a penalty of 300 per cent, while another proposed legislation will clamp down on benami property in India with both confiscation and prosecution.

This apart, the 62-year old lawyer-politician also proposed a new public procurement law for the consideration of the house that can encourage transparency in the way government buys goods and services while removing the reluctance in decision-making among the bureaucracy due to the fear of being questioned later by probe agencies.

Jaitley said while individual tax payers would stand to gain as much as Rs 4,40,200 by way of enhanced exemptions he has proposed in his two budgets since July last year, the corporate sector can benefit from a cut in tax rates from 30 per cent to 25 per cent over four years, albeit with a sharp reduction in the exemptions.

He said fiscal discipline has to be achieved despite demands for public investment. States would now be empowered with more resources as recommended by the Financial Commission report.Devolution will be Rs 5.2 lakh crore in 2015. Total transfer to States will 62 per cent.

The other highlights of Jaitley's budget include universal social security with health insurance coverage for the poor, a new bankruptcy law, a fresh gold monetisation scheme, the deferment of much-criticised General Anti-Avoidance Rule by two years with prospective effect, a pan-India goods and services tax regime from April 1, 2017, tax-free bonds to fund rail, roads and irrigation projects and five new ultra mega power projects.

Industry welcomed the proposals and said it will encourage investment with a better environment for doing business. The emphasis on infrastructure, agriculture, manufacturing and rural economy was particularly welcomed.In the realm of taxation, Jaitley said wealth tax will be abolished, with a cess, instead, on the super rich, the service tax rate hiked, exemption limits for individual tax-payers significantly enhanced, notably in areas like insurance, excise and customs duty rationalised and corporate tax rate cut over four years from 30 percent to 25 percent, with the removal of a host of exemptions.

At the same time, the finance minister said that he was not losing sight of financial discipline, sticking to the fiscal deficit target of 4.1 percent of GDP for the current fiscal and 3.9 percent for the next, and pruning it further to 3.5 percent and 3 percent over another two fiscals.This, despite a near 6 percent increase in the total expenditure at Rs.1,777,477 crore for the next year over the revised estimates for the current fiscal. But the size of plan expenditure, which forms the more productive use of finances, has been cut marginally by 0.5 percent to Rs.465,277 crore.

By Arvind Padmanabhan