BUDGET 2016-17

THE UNION BUDGET

NDA government's Second Budget

Intro--

--Growth of Economy accelerated to 7.6% in 2015-16.
--India hailed as a ‘bright spot’ amidst a slowing global economy by IMF.
--Robust growth achieved despite very unfavourable global conditions and two consecutive years shortfall in monsoon by 13%
--Foreign exchange reserves touched highest ever level of about 350 billion US dollars.
--Despite increased devolution to States by 55% as a result of the 14th Finance Commission award, plan expenditure increased at RE stage in 2015-16 – in contrast to earlier years.


The key challenges facing the Indian economy are agrarian in nature and hence a thrust on rural India was needed in Budget 2016, thus there has been an estimate of growth of economy to 8% following this Budget.

---According to the Budget, there are total Nine Sectors where the government has focused --

1. 1. Agriculture and farmer welfare (with a focus on doubling farmer's income in 5 years)
2. 2. Rural sector with focus on employment
3. 3. Social sector (Poverty, Human dev, poverty, incclusive growth, health, education, women and child dev, rural water supply/sanitation) 
4. 4. Education skills and job creation (to make India  a productive society)
5. 5. Infrastructure investment (to enhance efficiency and the Quality of Life)
6. 6. Financial sector reforms
7. 7. Governance reforms and ease of doing business
8. 8. Fiscal discipline
9. 9. Tax reforms to reduce compliance burden

**The government has also proposed rename Dept. of Disinvestment as Dept. of Investment and Public Asset Management. And fiscal deficit target has been retained at 3.5 per cent of GDP for next fiscal year in a big boost for stocks, currency and bond markets.

1. Agriculture and Farmer Welfare

---Theme: From Food Security to Income Security
* Total allocation -35, 984 cr
* PM Krishi Sinchai Yojana in mission mode-28.5 lakh hect under irrigation
* Long term irrigation fund in NABARD
* Farmers’ incomes to be doubled in five years by 2022. Total allocation for agriculture sector has been hiked to Rs. 35,984 crore.
* 89 languishing irrigation projects covering 80.6 lakh hect fast tracked
* Soil Health Card Scheme--to cover all the 14 cr farm oldings
* Unified Agricultural Marketing e-Platform--common platform for wholesale markets
* 15, ooo cr fund for interest subvention to reduce the burden of loan repayment on farmers
* PM Fasal Bima Yojana allocation of Rs. 5, 5000 cr
* Big focus on rural distress: Government will spend a record Rs. 38,500 crore on rural jobs programme (MGNREGA).
* Rs 850 crore for four dairying projects - ‘Pashudhan Sanjivani’, ‘Nakul Swasthya Patra’, ‘E-Pashudhan Haat’ and National Genomic Centre for indigenous breeds
* Promote organic farming through ‘Parmparagat Krishi Vikas Yojana’ and 'Organic Value Chain Development in North East Region'.


IRRIGATION
* A dedicated Long Term Irrigation Fund will be created in NABARD with an initial corpus of about ` 20,000 crore
* Programme for sustainable management of ground water resources 6,000 crore will be implemented through 3 multilateral funding
* 5 lakh farm ponds and dug wells in rain fed areas and 10 lakh compost pits for production of organic manure will be taken up under MGNREGA



2. Rural Sector
 Theme--Transforming Villages to Transform Lives
* Total allocation--87, 700 cr
* 2.87 lakh cr grant-in-aid to gram Panchayats and Municipalities
* Quantum jump of 228% as compared to the previous 5 year period
* Shyama Prasad Mukherjee Mission --300 Rurban centres
* 100 % village electrification by 1st May, 2018
* Digital Literacy Mission Scheme--covers 6 cr additional houesholds within the coming three years
* Rashtriya Gram Swaraj Abhiyan--665 cr (new scheme)
* PMGSY--27,000 cr allocation
* MGNREGS---Allocation of Rs 38,500 crore
* Rural road development schemes will get Rs. 19,000 crore, while another Rs. 20,000 crore will be used to fund irrigation schemes.
* Every block under drought and rural distress will be taken up as an intensive Block under the --Deen Dayal Antyodaya Mission
* Priority allocation from Centrally Sponsored Schemes to be made to reward villages that have become free from open defecation.



SOCIAL SECTORS

--
4. Education Skills and Job Creation

Theme--Unprecedented Focus on Quality of Education
* Increased allocation to Sarva Shiksha Abhiyan, better quality of education
* Regulatory architecture to 10 public and 10 private institutions to emerge as world-class Teaching and research institutions
* Higher education Financing Agency--initial capital bas eof 1000 cr can leverage more funds from the market
* Digital Depository for School Leaving certificated, college degrees, Academic awards and MArksheets to be set up
* 62 new Navodaya Vidyalayas to be opened
* Sarva Shiksha Abhiyan to increase the focus on Quality of Education
* Regulatory architecture to be provided to ten public and ten private institutions to emerge as world-class Teaching and Research Institutions

Empowering India's Youth (under social sector)
Theme---Better Skills, More Opportunities and More Jobs

* Pradhan mantri Kaushal Vikas Yojana (PNKVY) --1500 multi skill Training Institutes to be set up
* national Board for Skill Development Certification to skill 1 cr youth in the next 3 years
* Govt to pay EPF contribution of 8.33% for all new employees for the first three years
* 100 model career centres
* Model shops and establishments--BIll to be circulated to states
*Entrepreunrship education, and Training--2200 colleges,  300 schools, 500 government ITIs and 50  vocational trainign centres through massive open online courses
*GOI to pay off 8.33% on behalf of all new employees enrolling to EPFO in the first 3 years
* Deduction under section 80JJAAA of IT ACt available to all assesses



Vulnerable Section--(under soc sec)
* Target of disbursement under MUDRA increased to 1,80,000 crore.
* “Krishi Kalyan” cess of 0.5 per cent has been proposed on all services effective June 1, 2016. This will make most of services (such as eating out, buying property, etc.) more expensive.
* Income tax relief for small taxpayers, more taxes for super-rich: Those earnings less than Rs. 5 lakh per annum will get additional relief of Rs. 3,000 on income tax, but the surcharge on super-rich (income of over Rs. 1 crore) has been hiked from 12 per cent to 15 per cent.
* Pollution cess of 1 per cent on small petrol, LPG and CNG cars; 2.5 per cent on diesel cars of certain specifications; 4 per cent on higher-end models.
* Automation facilities to be provided to 3 lakh Fair price shops
* Government is launching a new initiative to provide cooking gas to BPL families with state support.
* LPG connections to be provided under the name of women members of family: Rs 2000 crore allocated for 5 years for BPL families.

---Allocation to Vulnerable sections
(a) Welfare to women--90, 625 cr
(b) Welfare to children-- 65, 758 cr
(c) SC Sub plan--24, 005 cr
(d) ST sub plan--38, 833 cr



5. Infrastructure Investment--
Theme--Enhancing Efficiency and the Quality of Life

* Total allocation --221246 cr (previous--180610 cr) thus 22.5 % over the previous years
* Caliberated marketing freedom to incentive gas production from deep water, ultra deep water and high pressure -hig temp areas
* Steps to revitalize the PPPs:
- Public utilitu (resolution of Disputes) Bill
- Guidelines for renegotiation of PPP concession agreements
- New Credit rating system for infrastructure projects
* reforms in the FDI Policy in the aread of : Insurance, and Pension Asset Reconstruction companies, Stock exchanges
* 100 % FDI through FIPB roue in the marketing of food products
* 70 languishing projects covering 8300 kn revived
* record 10, 000 kms of National highways to be approves in 2016-17
* Total investment including the PMGSY-- 97000 cr
* Total outlay for infastructure has been sharply increased to 2.21.246 cr
* Opening up road transport by removing permits in the passenger transport segments
* Revive 160 unserved and under-served airports in partnership with State govt
* Proposes to levy infrastructure cess of 1-4 per cent which will make cars costlier


6. Financial Sector
(including Banking sector)

Theme--Building trust, Improving predictability
* Comprehensive Central Legislation for dealing with menace of illicit deposit taking schemes
* Road map for the consolidation of PS banks
* Allocation of Rs 25, 000 cr towards the re-capitalization of Public sector Banks
* Banking Board Bureau will be operationalised.
* Road map for consolidation of Banking sector
* More resources will be raised for additional capital if required.
* General insurance Companies owned by the GOI to be listed in stock exchanges
* Comprehensive code on Resolution of Financial Firms to be introduced
*Statutory basis for a Monetary Policy Framework and a Monetary Policy Committee
*Deepening of Corporate bond market
*Financial Data management Centre to be set up for data aggregation and analysis
*Amendments in SARFAESI Act 2002 to enable sponsor os an ARC to hold up to 100% stake in the ARC



7. Governance Reforms with Ease of Doing Business

Theme--
* Creating a Social Security Platform Bill for Targeted Delivery of Subsidies, benefits and Services using Aadhar framewrok
* Introduce DBT on a pilot basis for fertilizers
* Automation facilities in 3 lakh fair price shops by March, 2017
Companies act amendment to imprve the enabling environment for Start ups
Price Stabilization Fund to help maintain stable prices of pulses
* Nation wide rollout of ATMs and micro ATMs through postal netwrok



8. Fiscal Discipline
 Theme--Boosting growth while Ensuring Fiscal prudence

* Fical Deficit in 2016-17 is at 3.5%
* Revenue Deficit target from 2.8% to 2.5% in RE 2015-16
* Setting up a Committee to review the implementation of the FRBM Act
* Every new Scheme sanctioned to have sunset date and outcome review
* Plan expenditure --Rs 5.50 lakh cr, increase of 15.3%
* Non-Plan expenditure kept at ` 14.28 lakh crores.
* Plan/Non Plan classification to be done away with from 2017-18

Black Money--A new amnesty scheme for those holding unaccounted money and assets has been announced. Those declaring undisclosed income under this scheme will have to pay 45 per cent tax.

9. Tax Reforms

Theme--Moving towards a Simplified Tax Regime
* To reduce compliance burden
* Decreased Tax burden on individuals--ceiling of tax rebate under Section 87A raised from 2,000 to 5,000
* Rent deduction limit under 80CG increased from 24k to 60k
* tax relief for MSME sector-Turnover limit under Presumptive taxation Scheme in section 44AD of IT Act increased to 2 cr
* Roadmap to reduce corporate tax while phasing out tax exemptions
* Deduction for additional interest of 50k per annum for loans upto 35 lakh for first time buyers
* General anti avoidance tax rule (GAAR) will be implemented from April 1, 2017.
* 13 cesses levied by various Ministries to be abolished






Make in India initiative gets a revamp under the Budget

---To help start-ups innovate, generate employment and be key partners in the MII programme, Mr.Jaitley proposed to back them through 100% deduction of profits for three out of five years for start-ups set up during April 2016 to March 2019. He said Minimum Alternate Tax will apply in such cases.
--- It has also been proposed to grant foreign investors ‘Residency Status’ subject to certain riders. Currently, these investors are granted business visa only up to five years at a time.
--- To strengthen the MII initiative, there was an allocation of Rs.1,804 crore towards the scheme for Investment Promotion and Amended Technology Upgradation Fund.
--- A modification in Customs and Excise Duty structure has also been proposed to incentivise domestic value addition and push the MII campaign.
--- Changes were proposed in Customs and Excise Duty rates on certain inputs, raw materials, intermediaries/components and other goods while several procedures were simplified.
--- Also, to incentivise the employers to recruit unemployed persons and bring into the books the informal employees and in turn, ensure new jobs are created in the formal sector, the Centre has decided to pay the Employee Pension Scheme contribution of 8.33% for all new employees enrolling in EPFO for the first three years of their employment.