Indian Finance Minister Arun Jaitley unveiled a budget for the poor on Monday, announcing new rural aid and health programmes in a strategy shift that could boost his ruling party in coming state elections.
Presenting his third budget, Jaitley described Asia's third-largest economy as a bright spot in a gloomy landscape and reiterated a forecast that it would grow by 7.6 percent in the fiscal year that is drawing to a close.
But he said the government wanted to ensure that the benefits of growth were more widely shared among India's 1.3 billion people. "We have a shared responsibility to spend prudently and wisely for the people, especially for the poor and downtrodden," the 63-year-old finance minister, who wore a powder-blue jacket, said in his opening remarks to lawmakers.
The spending package for the 2016/17 fiscal year from April 1 marks a radical shift from Prime Minister Narendra Modi's initial focus on investing in infrastructure in a bid to kick-start private-sector investment that remains weak.
Jaitley described his three priorities as: strengthening India's firewalls by ensuring macroeconomic stability and prudent fiscal management; driving growth through domestic demand; and reforms to boost economic opportunity.
Key areas of policy focus would be farming, social reforms, infrastructure and recapitalising India's banking system.
Modi's landslide election victory in 2014 raised hopes he would draw a line under India's socialist past, cut welfare and reduce the government's role in business.
In its first two years in power, his government splurged on roads and railways at the expense of welfare programmes in the hope of creating economic stimulus.
Modi's gamble was that infrastructure investment would yield dividends for the poor and the rural community. Four in 10 Indians rely directly on farming for their livelihoods, the government estimates.
Rising rural distress after back-to-back droughts and a recent heavy election defeat in a largely agricultural state have upset that calculus.
It has also left Modi's nationalist ruling party open to attacks by the opposition, who use a Hindi phrase to deride Modi for leading a "suit and boot" government that only works in the interest of the rich.
Jaitley's reeled off a list of $16 billion in measures targeted at the countryside, including spending on a job creation scheme, farmers' welfare and building of rural roads.
He targeted a total of $130 billion in credit to farmers.
*Total allocation for Agriculture, Farmers’ welfare and Irrigation set at 479.12 billion rupees, which is nearly twice the allocation of the previous year.
* New Health Protection scheme will provide health cover up to 100,000 per family and additional 30,000 rupees for senior citizens.
* Free LPG connections will be provided in the name of woman member of a family to 15 million BPL households in 2016-17 and to continue for two more years to cover 50 million households in total.
*Massive increase in public spending on infrastructure to increase 22.5% over the previous year.
* Higher Education Financing Authority set up, with an initial capital base of 10 billion rupees to promote higher education. In addition, 10 public and 10 private institutions to emerge as world-class Teaching and Research Institutions.
* Promoting a tax-friendly regime and minimizing hassles due to litigation through a New Dispute Resolution Scheme with low or zero penalties. Ongoing tax cases can be settled with ease.
* Increased relief for middle-class tax-payers by raising the ceiling of tax rebate
* Directly providing financial and other subsidies benefits to people who deserve them by enacting a new law and developing a social security platform using Aadhar.
* Boosting formal sector employment by provisioning 10 billion rupees towards contributing 8.33% on behalf of all new employees enrolling in EPFO for the first three years of their employment.
* Simplified and pro-market tax measures such as laying out the roadmap of phasing out of exemptions under Corporate Taxes, abolishing small cesses, providing complete pass through of income-tax to securitization trusts and reducing period of obtaining long-term capital gains treatment for unlisted companies to three years.
* Facilitating Affordable Housing by 100% tax exemption for profits from small projects, not subjecting distribution REITs and INVITs to Dividend Distribution Tax and encouraging small first-time home buyers by deducting ¬additional interest of 50,000 rupees.
* Reducing black money through a scheme to declare undisclosed income by paying 45% tax in a given compliance window.
* 100% deduction of profits for 3 out of 5 years for startups set-up during April 2016 to March 2019
Insurance and Pensions
*Reforms in FDI Policy in the Areas of Insurance and Pensions, Asset Reconstruction Companies, Stock Exchanges
*100% FDI to be Allowed Through FIPB Route in Marketing Food Products Produced and Manufactured in India
*A New Health Protection Scheme to provide health cover up to 100,000 rupees per family announced
*National Dialysis Services Programme to be launched
*3000 Stores to be opened under Prime Minister’s Jan Aushadhi Yojana during 2016-17
* Double farmer income in five years
* Expand irrigation and crop insurance program
* Unprecedented farm credit target, unified agriculture market
Relief for poor
* Health insurance scheme to protect a third of population
* Ensure universal coverage of cooking gas
* Record allocation for rural jobs program
* More rural roads, railways
* 85 percent of stalled road projects are back on track
* 100 percent electrification of villages by May 2018
* To allow 100 percent FDI in food processing
* FDI rules eased in exchanges, insurance, asset reconstruction
* Government vows to stand behind state-run banks
Source: Gulf News