The budget has provided the impetus to rural infrastructure, which will help in reviving the economy. A sum of Rs 2.10 lakh crores will be spent on roads and various schemes, which would flow to rural India. Such a magnitude of allocation has never been done before and if one adds the amount of Rs 1.5 lakh crores that the Railways plan to spend, a staggering Rs 3.6 lakh crores is to be pumped into rural India. This kind of inflow will revive the economy, create jobs in rural India and mitigate the need for everyone rushing to the cities. It is a bold and progressive budget aimed at growth. It is the multiplier effect that will create revenues which could be higher than projected.
Sand artist Sudarsan Pattnaik makes a sand sculpture on upcoming Budget 2016 at Puri sea beach of Odisha on Sunday. Pic/PTI
The common man can heave a sigh of relief as there is nothing new that would be going out of his pocket, this time around. On the other hand, he has been given relief in a number of ways which are small and big. The foremost is deduction under Section 87A where the ceiling has been raised from Rs 2,000 to Rs 5,000 for people in the income bracket of Rs 5 lakh and below. This would benefit two crore taxpayers and this is the largest bracket.
The second benefit is to people who live in rented houses. The deduction limit under section 80GG has been raised from Rs 24,000 to Rs 60,000 giving a relief of Rs 3000 per month.
Realising the need for house for all, the budget has proposed a benefit for first time house buyers of an additional Rs 50,000 towards interest for a house loan costing no more than R50 lakh and a bank loan of no more than Rs 35 lakh. This sure would go a long way in helping and fulfilling the need of a house for all in the next five years.
To make affordable housing a reality, the government has spelt out tax breaks for companies involved in housing where they construct flats of 30 sq m in four metros and 60 sq m in other cities where projects are approved during June 16 to March 2019 and completed within three years of approval. Buying of cars above the value of R10 lakh has been made expensive by 1 per cent to 4 per cent and would be termed as infrastructure cess.
The customary increase in excise duties on cigarettes and tobacco products was there as usual. By and large, it benefits the common man, it benefits the people living in rural India greatly and would benefit corporates as the money spent on infrastructure would lead to higher purchasing power and hence greater consumption.
There is a levy on jewellery which has been put once again. The idea is not the levy but to bring a check on the expenditure on this item so that there may be better tax compliance and people who have been spending big money but not paying tax, may be brought under the tax net. Finance Minister Arun Jaitley has proposed a sort of voluntary disclosure scheme for a short period of time with a tax rate of 45 per cent as well.
Coming to the markets, they were wild and rightfully so. The Sensex made a low of 22,494.61 points at which time it was down 660 points. The market was not sure as to how much money the FM was going to raise.
When the figure of Rs 19,000 crores was announced by him it gave relief and the high of the market post this fall was 23,343.22. At this point, the market was up 189 points for the day. It had recovered from the low, by a good 850 points.
Markets finally closed the day at 23,002 points a loss of 152 points. What is significant for the day is that we have broken the low made on February 12, of 22,600 and closed above the close of that day of 22,986.
Technically, this would mean we have retested the bottom successfully making a new low and recovering to close higher. If, in the next few days, the low is not broken, we would have an intermediate term bottom in place.
If one were to summarise the budget, it has taken the only natural choice that the FM had of pursuing growth and spending on infrastructure. He has done it. If, this year after two consecutive bad monsoons the rain Gods are benevolent, India would be all over the place again.