Other Sectors in Budget

Defence & Aerospace in Budget, 2017-18

The outlay for Defence in the Budget 2017-18 stands at Rs. 274113 Crore with a modest hike of 6% in allocation from the previous year. With this, currently, the defence budget stands at 1.62% of the GDP.

Major Weapon Purchases not likely

The given allocation is not going to cater to the major weapons purchases and this is also in contradiction to a defence ministry panel report which recommended 2.5% of the GDP for defence budget. Further, despite the overall increase in revenue budget pertaining to defence, the figure also included OFB and DRDO expenses and thus, overall budget outlay for defence procurement is down by Rs. 1,60,996 Crore. Further, there are chances that a large part of the allocation will be eroded by GST and Custom Duties. So, in summary, the budget is not at all good for defence and seems to have ignored the defence requirements.

Environment in Budget 2017-18

This year, the environment ministry has got an increase of around 19% in its budgetary allocation. The Project Tiger, Project Elephant, NTCA etc. have got increased allocation. The key proposals are as follows:

Waste to Energy Plants

The government is establishing pilot plants for environment friendly disposal of solid waste and conversion of biodegradable waste to energy at New Delhi and Jaipur railway stations. There are plans to establish five such more plants.

Piped Supply of Water for Open Defecation Free villages

Open Defecation Free (ODF) villages are now being given priority for piped water supply.


By 2019 all coaches of Indian Railways will be fitted with Bio-Toilets.

Unaddressed Issues

Budget could do better for environment. There was a long pending demand of a Technology Up gradation Fund for the Chemical industry to support the effluent treatment plants, chemical waste disposal plants etc. Further, there was a demand to reduce levy on clean energy cess for manufacturers who adopt clean energy.

Rural Population in the Budget 2017-18

The Finance Minister has made some announcements in the Budget 2017-18 for rural population keeping in focus the aim of providing employment & basic infrastructure. These announcements are as follows:

  • Fixing aim to make 1 Crore households free from poverty by 2019
  • Fixing aim to make 50000 gram panchayats free from poverty by 2019
  • Highest ever MGNREGA allocation at Rs. 48000/- Crore.

Further, as a part of a sub mission of the National Rural Drinking Water Programme, government announced a proposal to provide safe drinking water to over 28,000 arsenic and fluoride affected habitations in next four years.

Youth in the Budget 2017-18

Towards the government agenda of Energising youth through education, skills and jobs, the government has made following announcements for youth:

  • To introduce a system of measuring annual learning outcomes in our schools.
  • At least 350 online courses to be launched on SWAYAM platform
  • To extend Pradhan Mantri Kaushal Kendras to more than 600 districts.
  • To establish 100 India International Skills Centres across country.
  • To launch Skill Acquisition and Knowledge Awareness for Livelihood Promotion programme (SANKALP) to provide market relevant training to 3.5 crore youth.
  • To launch a new scheme for creating employment in leather and footwear industries.
  • To launch Incredible India 2.0 Campaign.
  • Himalayan Region Sports Festival Scheme has been allocated an amount of Rs. 15 crore for 2017-18

There are hige gaps in skill ecosystem of the country and there is a need to focus on pillars of viability, quality and capacity in skill development.

The Poor and the Underprivileged

Keeping a focus on strengthening the systems of social security, health care and affordable housing; the following announcements were made in Union Budget for the Poor & Underprivileged:

  • Affordable housing will be given infrastructure status. This will also attract higher investment in affordable housing sector.
  • National Housing Bank will refinance individual housing loans of about Rs 20,000 crore in 2017-18.
  • Government will prepare an action plan to reduce IMR {Infant Mortality Rate} from 39 in 2014 to 28 in 2019; and Maternal Mortality Rate from 167 in 2011-13 to 100 by 2018-19.
  • Two new AIIMS will be set up in Jharkhand and Gujarat.
  • To simplify, rationalise and amalgamate the existing labour laws into four codes wages; industrial relations; social security & welfare; and safety & working conditions.

Infrastructure Sector

With agenda of Growth & stability by stronger institutions, the budget has made the following key announcements on Infrastructure sector:

  • Foreign Investment Promotion Board (FIPB) to be abolished.
  • A bill related to curtailing the menace of illicit deposit schemes will be introduced.
  • A bill related to resolution of financial firms to be introduced.
  • Arbitration and Consolation Act 1996 to be amended to streamline the institutional arrangements for resolution of disputes on infrastructure related contracts.
  • Time bound listing of identified CPSEs on stock exchanges
  • Proposal to create integrated oil major.

Public Service” in the Budget 2017-18

Some important announcements were made towards Effective governance and efficient service delivery through people’s participation.

  • Government will utilize the Head Post Offices as front offices for rendering passport services.
  • A web based interactive Pension Disbursement System for Defence Pensioners will be established.
  • The government will rationalize the number of tribunals and merge tribunals wherever appropriate.

The government has given message that it would as far as possible go for maximum governance and minimum government.

Water Sector

  • The Government has already established a Long Term Irrigation Fund (LTIF) in Nabard. The recent announcements make its total corpus to be of size of Rs.40000 Crore.
  • The Government will set up a dedicated Micro-Irrigation Fund in NABARD to achieve the goal – more crop per drop. This fund will have an initial corpus of Rs.5000 Crore.
  • During 2017-18, another 5 lakh farm ponds will be taken up. This will greatly to drought proofing of gram panchayats.
  • The budget has proposed to provide safe drinking water to over 28,000 arsenic and fluoride affected habitations in the next four years. This will be a sub mission of the National Rural Drinking Water Programme (NRDWP).

Current fiscal position

The Government has remained adhered to the fiscal consolidation path. Though it has enhanced budgetary expenditure in critical areas such as infra, farming etc. but at the same time, adhered to the Fiscal Deficit ratio of 3.5% in 2016-17 and set a target of 3.2% for 2017-18, and 3% for 2018-19.

Also we note that in January 2017, the FRBM review committee chaired by NK Singh had submitted its report, in which it has recommended a fiscal deficit of 3% target in next three years. This committee had also introduced the concept of an “Escape Clause” which allows deviation up to 0.5% of GDP from the stipulated fiscal targets.

Key Direct Tax Proposals in the Budget 2017-18

The main direct tax proposals in Budget 2017-18 are as follows:

  • The tax rate for income between Rs. 2.5 Lakh to Rs. 5.00 Lakh has been reduced from 10% to 5% for individuals, HUFs and Association of Persons.
  • For senior citizens (60-80 years), the tax rate has been reduced from 10% to 5% in respect of the incomes between Rs. 3 to 5 Lakh.
  • A surcharge of 10% has been introduced for persons/ HUF/ AOP earning between Rs. 50 Lakh to Rs. 1 Crore.
  • Corporate tax rate reduced to 25% for companies with less than Rs. 50 Crore turn over.
  • Individuals and HUFs carrying on business or profession no longer required to maintain books of account if their income is below Rs. 250,000 and sales/turnover/gross receipts is below Rs. 25 lakhs.
Key tax proposals in Budget to curb the cash economy

Curbs on cash economy, for example – expenditure incurred in cash exceeding Rs. 10,000 for acquisition of asset to be ignored; any payment in cash above Rs. 10000 to a person in a day to be denied deduction; Cash donations above Rs. 2000 not to be allowed as deduction; Cash transaction of above Rs. 300,000 to be prohibited {this is now Rs. 200,000};

Direct taxes towards promotion of affordable housing sector

The Budget has given following relaxations for the development of affordable housing sector:

  • While computing the size of residential unit “carpet area” to be considered instead of “built-up area”;
  • The restriction of 30 square meters on the size of residential units to apply only to projects located within the municipal limits of Chennai, Delhi, Kolkata or Mumbai;

Further, the time limit for completing the project is to be increased from existing three years to five years.

Key changes in indirect taxes

Though the custom duties, central excise duties and service taxes for individual items keep changing from budget to budget, the:

  • The effective rate of customs duty remains unchanged at 29.44%.
  • The effective rate of Excise Duty (ED) remains unchanged at 12.5%.
  • Effective rate of service tax remains unchanged at 15%.

With the passing of the crucial GST bills, these rates would become irrelevant and new four stage GST rates would be applicable.