Nine Pillars of Union Budget 2016-17

Union budget 2016-17 is centered around a transformative agenda with nine pillars. These nine pillars of Modi-Jaitley macroeconomic strategy provide adequate basis to ensure that India remains a growing large economy. These nine pillars are as follows:

1. Agriculture and Farmer welfare
2. Rural Sector
3. Social Sector & Healthcare
4. Education, Skills and Job creation
5. Infrastructure Investment
6. Financial Sector Reform
7. Governance Reform and Ease of Doing Business
8. Fiscal Discipline
9. Tax reforms to reduce compliance burden

They have been discussed below:

Agriculture and Farmers’ Welfare

Agriculture and farmer’s welfare has received the top slot in the nine-pillar agenda of Budget 2016-17 with total allocation of Rs. 35,984 crore. Due importance has been given to irrigation by announcing that Pradhan Mantri Krishi Sinchai Yojana is to be implemented in mission mode and 28.5 lakh hectares will be brought under irrigation. The government will fast track 89 irrigation projects languishing under Accelerated Irrigation Benefits Programme. Government has also decided to set up a Long Term Irrigation Fund within NABARD with an initial corpus of about Rs.20,000 crore. Other policy announcements are as follows:

• Programme for sustainable management of ground water resources with an estimated cost of Rs.6,000 crore will be implemented through multilateral funding
• 5 lakh farm ponds and dug wells in rain fed areas and 10 lakh compost pits for production of organic manure will be taken up under MGNREGA
• Soil Health Card scheme will cover all 14 crore farm holdings by March 2017.
• 2,000 model retail outlets of Fertilizer companies will be provided with soil and seed testing facilities during the next three years
• Promote organic farming through ‘Parmparagat Krishi Vikas Yojana’ and ‘Organic Value Chain Development in North East Region’.
• Unified Agricultural Marketing e-Platform to provide a common e-market platform for wholesale markets
• Allocation under Pradhan Mantri Gram Sadak Yojana increased to Rs. 19,000 crore. Will connect remaining 65,000 eligible habitations by 2019.
• To reduce the burden of loan repayment on farmers, a provision of Rs. 15,000 crore has been made in the BE 2016-17 towards interest subvention
• Allocation under Prime Minister Fasal Bima Yojana Rs.5,500 crore.
• 850 crore for four dairying projects – ‘Pashudhan Sanjivani’, ‘Nakul Swasthya Patra’, ‘E-Pashudhan Haat’ and National Genomic Centre for indigenous breeds.

The most notable phrase in the Budget speech was ‘doubling of farmers’ incomes in five years’. This seems to be a hyperbole because this would need 15% growth per year and is a formidable target.

Rural Sector

The total allocation for rural sector has been at Rs. 87765 Crore. The other announcements are as follows:

• 2.87 lakh crore will be given as Grant in Aid to Gram Panchayats and Municipalities as per the recommendations of the 14th Finance Commission
• Every block under drought and rural distress will be taken up as an intensive Block under the Deen Dayal Antyodaya Mission
• A sum of Rs.38,500 crore allocated for MGNREGS.
• 300 Rurban Clusters will be developed under the Shyama Prasad Mukherjee Rurban Mission
• 100% village electrification by 1st May, 2018.
• District Level Committees under Chairmanship of senior most Lok Sabha MP from the district for monitoring and implementation of designated Central Sector and Centrally Sponsored Schemes.
• Priority allocation from Centrally Sponsored Schemes to be made to reward villages that have become free from open defecation.
• A new Digital Literacy Mission Scheme for rural India to cover around 6 crore additional household within the next 3 years.
• National Land Record Modernisation Programme has been revamped.
• New scheme Rashtriya Gram Swaraj Abhiyan proposed with allocation of Rs.655 crore.

Social Sector and Health Care

The key budget proposals towards social sector and health care are as follows:

• 151581 Crore have been allocated for social sector including education and health care.
• 2,000 crore have been allocated for initial cost of providing LPG connections to BPL families.
• New health protection scheme will provide health cover up to Rs. One lakh per family. For senior citizens an additional top-up package up to Rs. 30,000 will be provided.
• 3,000 Stores under Prime Minister’s Jan Aushadhi Yojana will be opened during 2016-17.
• “National Dialysis Services Programme” to be started under National Health Mission through PPP mode.
• Stand Up India Scheme to facilitate at least two projects per bank branch. This will benefit at least 2.5 lakh entrepreneurs.
• National Scheduled Caste and Scheduled Tribe Hub to be set up in partnership with industry associations.
• Allocation of Rs.100 crore each for celebrating the Birth Centenary of Pandit Deen Dayal Upadhyaya and the 350th Birth Anniversary of Guru Gobind Singh.

Education, Skills And Job Creation

Following are the important announcements made in Education, Skills and Job creation.

• Government will open 62 new Navodaya Vidyalayas.
• Under Sarva Shiksha Abhiyan, the government would increase focus on quality of education.
• Regulatory architecture to be provided to ten public and ten private institutions to emerge as world-class Teaching and Research Institutions
• Government will establish a Higher Education Financing Agency with initial capital base of Rs.1000 Crores
• A Digital Depository for School Leaving Certificates, College Degrees, Academic Awards and Mark sheets to be set-up.
• For skill development, allocation of Rs. 1804 Crore has been done. Government will set up 1500 Multi-skill Training Institutes.
• Government will also establish a National Board for Skill Development Certification partnership with the industry and academia.
• Government also would provide Entrepreneurship Education and Training through Massive Open Online Courses (MOOCs).
• In job creation, the Government will pay a contribution of 8.33% for new employees enrolling in EPFO for the first three years of their employment. A provision of Rs. 1000 crore has been made towards this direction.
• The government will make 100 Model Career Centres operational by end of 2016-17 under the National Career Service.
• Government will draft a Model Shops and Establishments Bill and circulate it to states.

Infrastructure and Investment

The key proposals in Infrastructure and Investment are as follows:

• Total investment in the road sector, including PMGSY allocation, would be Rs.97,000 crore during 2016-17.
• India’s highest ever kilometres of new highways were awarded in 2015.
• To approve nearly 10,000 kms of National Highways in 2016-17.
• Allocation of Rs.55,000 crore in the Budget for Roads. Additional Rs. 15,000 crore to be raised by NHAI through bonds.
• Total outlay for infrastructure – Rs.2,21,246 crore.
• Amendments to be made in Motor Vehicles Act to open up the road transport sector in the passenger segment.
• Action plan for revival of unserved and underserved airports to be drawn up in partnership with State Governments.
• To provide calibrated marketing freedom in order to incentivise gas production from deep-water, ultra deep-water and high pressure-high temperature areas.
• Comprehensive plan, spanning next 15 to 20 years, to augment the investment in nuclear power generation to be drawn up.

Steps to re-vitalise PPPs

• Government will introduce the Public Utility (Resolution of Disputes) Bill in 2016-17.
• Guidelines for renegotiation of PPP Concession Agreements will be issued
• New credit rating system for infrastructure projects to be introduced.
• Reforms in FDI policy in the areas of Insurance and Pension, Asset Reconstruction Companies, Stock Exchanges.
• 100% FDI to be allowed through FIPB route in marketing of food products produced and manufactured in India.
• A new policy for management of Government investment in Public Sector Enterprises, including disinvestment and strategic sale, approved.

Financial Sector Reforms

The following announcements have been made towards Financial Sector Reforms.

• A comprehensive Code on Resolution of Financial Firms to be introduced.
• Statutory basis for a Monetary Policy framework and a Monetary Policy Committee through the Finance Bill 2016.
• A Financial Data Management Centre to be set up.
• RBI to facilitate retail participation in Government securities.
• New derivative products will be developed by SEBI in the Commodity Derivatives market.
• Amendments in the SARFAESI Act 2002 to enable the sponsor of an ARC to hold up to 100% stake in the ARC and permit non institutional investors to invest in Securitization Receipts.
• Comprehensive Central Legislation to be bought to deal with the menace of illicit deposit taking schemes.
• Increasing members and benches of the Securities Appellate Tribunal.
• Allocation of Rs.25,000 crore towards recapitalisation of Public Sector Banks.
• Target of amount sanctioned under Pradhan Mantri Mudra Yojana increased to Rs.1,80,000 crore.
• General Insurance Companies owned by the Government to be listed in the stock exchanges.

Governance and Ease Of Doing Business

The following announcements have been made towards Governance Reform and Ease of Doing Business.

• A Task Force has been constituted for rationalisation of human resources in various Ministries.
• Comprehensive review and rationalisation of Autonomous Bodies.
• Aadhaar to be given statutory backing
• Introduction of DBT on pilot basis for fertilisers.
• Automation facilities in 3 lakh fair price shops by March 2017.
• Amendments in Companies Act to improve enabling environment for start-ups.
• Price Stabilisation Fund with a corpus of Rs.900 crore to help maintain stable prices of Pulses.
• “Ek Bharat Shreshtha Bharat” programme will be launched to link States and Districts in an annual programme that connects people through exchanges in areas of language, trade, culture, travel and tourism.

Fiscal Discipline

Following are the key proposals in fiscal discipline.

• Fiscal deficit in RE 2015-16 and BE 2016-17 retained at 3.9% and 3.5%.
• Revenue Deficit target from 2.8% to 2.5% in RE 2015-16
• Total expenditure projected at Rs.19.78 lakh crore
• Plan expenditure pegged at Rs.5.50 lakh crore under Plan, increase of 15.3%
• Non-Plan expenditure kept at Rs.14.28 lakh crores
• Special emphasis to sectors such as agriculture, irrigation, social sector including health, women and child development, welfare of Scheduled Castes and Scheduled Tribes, minorities, infrastructure.
• Mobilisation of additional finances to the extent of Rs.31,300 crore by NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority by raising Bonds.
• Plan / Non-Plan classification to be done away with from 2017-18.
• Every new scheme sanctioned will have a sunset date and outcome review.
• Rationalised and restructured more than 1500 Central Plan Schemes into about 300 Central Sector and 30 Centrally Sponsored Schemes.
• Committee to review the implementation of the FRBM Act.

Tax reforms to reduce compliance burden

The proposals towards tax reforms are focused on providing certainty in taxation and simplification and rationalization of the taxes. The key proposals are as follows:

• Domestic taxpayers can declare undisclosed income or such income represented in the form of any asset by paying tax at 30%, and surcharge at 7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income. Such declarants will have immunity from prosecution.
• Surcharge levied at 7.5% of undisclosed income will be called Krishi Kalyan surcharge to be used for agriculture and rural economy.
• New Dispute Resolution Scheme to be introduced. No penalty in respect of cases with disputed tax up to Rs.10 lakh. Cases with disputed tax exceeding Rs.10 lakh to be subjected to 25% of the minimum of the imposable penalty. Any pending appeal against a penalty order can also be settled by paying 25% of the minimum of the imposable penalty and tax interest on quantum addition.
• High Level Committee chaired by Revenue Secretary to oversee fresh cases where assessing officer applies the retrospective amendment.
• One-time scheme of Dispute Resolution for ongoing cases under retrospective amendment.
• Penalty rates to be 50% of tax in case of underreporting of income and 200% of tax where there is misreporting of facts.
• Disallowance will be limited to 1% of the average monthly value of investments yielding exempt income, but not exceeding the actual expenditure claimed under rule 8D of Section 14A of Income Tax Act.
• Time limit of one year for disposing petitions of the tax payers seeking waiver of interest and penalty.
• Mandatory for the assessing officer to grant stay of demand once the assesse pays 15% of the disputed demand, while the appeal is pending before Commissioner of Income-tax (Appeals).
• Monetary limit for deciding an appeal by a single member Bench of ITAT enhanced from Rs.15 lakhs to Rs.50 lakhs.
• 11 new benches of Customs, Excise and Service Tax Appellate Tribunal (CESTAT).
• Towards simplification and rationalization of taxes, the government will abolish 13 cesses, levied by various Ministries in which revenue collection is less than Rs.50 crore in a year.
• For non-residents providing alternative documents to PAN card, higher TDS not to apply.
• Revision of return extended to Central Excise assesses.
• Additional options to banking companies and financial institutions, including NBFCs, for reversal of input tax credits with respect to non-taxable services.
• Customs Act to provide for deferred payment of customs duties for importers and exporters with proven track record.
• Customs Single Window Project to be implemented at major ports and airports starting from beginning of next financial year.
• Increase in free baggage allowance for international passengers. Filing of baggage only for those carrying dutiable goods.