The phrase “balanced Budget” is clichéd and frankly, quite worn. But if there is one instance where its use will be justified and pardoned, it is today.

Arun Jaitley has increased allocations for the farm, rural sector and social sector schemes along with the infrastructure segment — mainly roads and railways. And he has managed to spend more without imposing major taxes on the common man.

Four big takeaways

There are basically four big takeaways from the Budget. First, and most important, the adherence to the fiscal deficit target of 3.5 per cent of GDP for 2016-17. Jaitley needs a pat on the back for sticking to prudence when the provocation to loosen the purse strings was high. That he has managed to achieve this feat in the face of higher spending due to OROP and the Pay Commission award, and without recourse to additional resource mobilisation in the form of higher/new taxes is notable. Of course, final judgment should await a close look at the numbers in the Budget documents.

Two, is the voluntary disclosure of income scheme that he has proposed with a 45 per cent tax on declared income and no questions asked. This scheme will be open from June 1 to September 30. This will target the stock of domestic black money. In his Budget last year, Jaitley had introduced a similar amnesty scheme for black money stashed abroad either as property or as stock investments. That scheme, however, failed with just 638 people declaring a total of Rs.3,770 crore of concealed income.

Jaitley’s latest scheme is bound to draw a comparison with the famous Voluntary Disclosure of Income Scheme that P. Chidambaram introduced in his ‘dream budget’ of 1997. That was a highly successful scheme that lead to disclosure of a mammoth Rs 33,000 crore of concealed income.

Three, is the commitment to rural and social sector schemes, specifically the MGNREGA, which has got the highest allocation ever at Rs. 38,500 crore. After having expressed a million doubts over the effectiveness of the scheme when out of power, it must have taken a lot for the BJP-led government to concede its effectiveness now and to increase the outlay to levels that even the Congress did not. A word of caution here: the government should plug leakages and ensure that the funds lead to creation of rural infrastructure rather than just going down the drain as idle wages.

And that brings us to fourth and final takeaway which is the commitment to Aadhar. Yet again, this is notable given that Prime Minister Modi was not exactly a fan of the Aadhar scheme earlier. The success that this government has tasted with Direct Benefit Transfer in cooking gas has probably lead to a reassessment of the utility of Aadhar in cash transfers for the various social sector schemes run by the Centre. Besides, Aadhar is a critical part of the trinity in JAM along with the Jan Dhan account and the mobile revolution.

Bank recapitalisation

There is bound to be some disappointment with the Rs.25,000 crore allocation for bank recapitalisation, which though higher than the Rs 8,000 crore provided last year, is lower than what the markets expected. There is also likely to be disappointment with the Finance Minister not dropping corporate tax rates, as widely expected. Yet, the proposal that new companies to be registered after March 1 can opt for a 25 per cent rate with nil investment-linked deductions is a clever way of introducing the lower tax rate into the system. It also signals commitment to move to the lower rate for all companies eventually.

Infrastructure

The focus on roads and railways reminds one of the earlier NDA government under Atal Behari Vajpayee, which really set-off the road revolution in India. The Rs 55,000 crore for roads and Rs.19,000 crore under the PM Gram Sadak Yojana will give a boost to the economy as it creates demand for everything from cement to steel and capital goods to labour. Together with State share, the total spending on roads is budgeted at Rs.97,000 crore for 2016-17.

Tax

The stock markets are bound to be disappointed with the increase in Securities Transaction Tax on options from 0.017 per cent to 0.05 per cent as also the sting in the Dividend Distribution Tax where Jaitley has proposed an extra 10 per cent tax in the hands of the investor on dividend income over Rs.10 lakhs in a year. However, the partial easing of tax on withdrawal from the National Pension System should come as a relief to individuals and the market. The Finance Minister has proposed at 40 per cent of withdrawals be tax exempt.

In sum, Jaitley’s third budget is more like a Rahul Dravid innings than a Virender Sehwag one. It is workmanlike and not flashy but may achieve the purpose all the same.

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