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1 March 2016 Editorial

 

1 MAR 2016 

A message aimed at the heart of India

Stung by the criticism of being a suit boot kisarkar and by the National Democratic Alliance’s electoral reverses in Bihar, Finance Minister ArunJaitley has made bold to address the perception deficit in announcing a raft of proposals aimed at the rural sector and farmers. From a cess of 0.5 per cent on all taxable servicesthat would expressly be used to finance improvements in agriculture and schemes to benefit farmers, to a dedicated long-term irrigation fund with a corpus of Rs.20,000crore, the Union Budget seeks to pave the path for making good Prime Minister NarendraModi’s promise to double farm incomes by 2022. Other measures to further this course include an outlay of Rs.19,000 crore that the Central government will spend this year on rural roads as part of its goal to ensure that all habitations are connected by 2019, and a push to achieve universal village electrification in the next two years. Between improved road connectivity and the availability of electricity, the potential is significant for a multiplier effect on the rural economy and improvements to the quality of life for residents of the hinterland. Two more steps are noteworthy. The Budget proposes the introduction of a health insurance scheme that would provide up to Rs.1 lakh as coverage against hospitalisation costs for economically weak households, with senior citizens above the age of 60 eligible for another Rs.30,000 in top-up cover. While the sum offered as protection is low by most standards for contemporary critical in-hospital care, especially in the private sector, for the indigent this could well mean the difference between not even attempting to seek medical care and a chance at surviving a debilitating illness. The other, equally laudable, initiative is to provide all families below the poverty line with cooking gas. This can afford those in underprivileged homes the dignity of a quicker and less harmful way to keep their kitchen fires running.

From a larger macroeconomic perspective, Mr.Jaitley has for now said he will stick to his prior fiscal deficit commitments, but he has simultaneously flagged the need for more flexibility in dealing with situations when overall economic conditions are unfavourable. For this he has proposed the setting up of a committee to review the entire road map mandated by the Fiscal Responsibility and Budget Management Act of 2003 to study the possibility of having a target range instead of fixed numbers that would give the government the needed policy space to align a fiscal expansion or contraction with credit availability. For the individual tax payer, the Budget offers little to cheer, save some tax sops that lower and middle income families can leverage to invest in affordable housing, or squirrel away some more cash from an increase in the deduction towards house rent. The salaried class is likely to feel hard done by a move to tax 60 per cent of the corpus created from contributions to the Employees’ Provident Fund starting April 1 as part of a move to create a ‘pensioned society. With elections to five provincial Assemblies due this year, Mr.Jaitley’s focus on the rural and agrarian communities is clear proof that the Budget still retains its relevance as a powerful messaging tool of a government’s political stances. Whether Budget 2016 will engender a harvest of votes, only time will tell.

                                                                


 

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