NEW DELHI: India on Saturday unveiled a please-all federal budget that ostensibly sought to balance the interests of the country’s impoverished millions and its business community.
“India is about to take off,” the country's finance minister
Arun Jaitley said, in his budget speech to parliament. “The world is predicting that this is India’s chance to fly.”
Presenting the first full budget of the Narendra Modi-led
government, following a landslide election victory in May last year,
Jaitley said that the government would provide a universal social
security safety net and several new pension schemes to assist the
poorest of its citizens.
Jaitley sought to unburden the corporate sector by reducing
corporate tax to 25 percent from 30 percent. He abolished the “wealth
tax,” and replaced it with a 2 percent surcharge on the incomes of the
“super rich”, who earn more than $150,000 a year. The money obtained
from this additional tax would go toward infrastructure funding.
Although the budget incentivized savings, it did not provide any direct tax relief to the middle or low income classes.
“I thought it was more prudent to make people save more
rather than make this a consumption society,” Jaitley reportedly said in
an interview following his budget speech. However, he proposed a scheme
to monetize about 20,000 tons of privately held gold by introducing a
gold deposit account. Jaitley also said that the government would come
up with sovereign bonds to discourage the purchase of physical gold.
This might help reduce gold imports to India, which is currently the
world’s biggest gold importer.
Jaitley allocated an additional $11 billion toward spending
on infrastructure and also sought to rein in the country’s fiscal
deficit to 3 percent of its gross domestic product over the next three
years.
In a bid to address the country’s chronic power shortage,
Jaitley said that India would set up at least four new “ultra mega”
power projects that would supply electricity on a “plug and play” basis
to its national grid.
Prime Minister Modi tweeted that
his government’s budget has a “distinct focus on farmers, youth, poor,
neo-middle class” and the common man. “[The] budget is investment
friendly and removes all doubts on tax issues. It assures investors that
we have a stable, fair and predictable tax system,” Modi said in a
subsequent tweet.
While India is expected to grow at 7.4 percent this year,
Jaitley hoped that in the near future, the economy would grow at an
accelerated pace of 8 to 8.5 percent, and that by March 2016, inflation
would be at 5 percent.
Jaitley’s budget speech also focused on the creation of a
public debt management agency and new bankruptcy laws. The finance
minister sought to nurture start-ups by creating a special investor
capital fund. In the last few years, India has seen the growth of
several technology start-ups, especially in the e-commerce arena.
While the government sought to control its burgeoning
subsidy bill, Jaitley said that it would continue with Mgnrega, a rural
employment generation scheme, which was the flagship project of the
previous Congress-led government. The government would also seek to
spend billions on defense and petroleum products, the bulk of which the
country imports.
Jaitley announced the merger of India’s Forward Markets
Commission with its market regulator -- the Securities and Exchange
Board of India. He also said that India would implement new laws, with
provisions for stringent penalties, to curb "black money," referring to
untaxed and unaccounted wealth.
The reaction to the budget from the business community was largely positive.
“The finance minister has come out with a pragmatic budget
which is directionally focused at achieving growth and keeping the
fiscal prudence in mind,” Richard Rekhy, CEO of KPMG in India, said, in
an emailed statement. "The focus is on ease of doing business in India
and increased infrastructure spend. Measures like [the] new bankruptcy
legislation, startup entrepreneur’s funds, GST (Good and Services Tax)
rollout by FY 2016, deferral of GAAR (General Anti-Avoidance Rules) will
definitely support the cause of ease of doing business in India."
After a day of volatile trading, the country's stock
markets closed higher on Saturday. While the 30-share Sensex closed 141
points higher, the 50-share Nifty gained 57 points.
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