NEW DELHI: Dismissing the notion that it is populist, Finance Minister Arun Jaitley on Thursday said the budget is a blend of “fiscal prudence and also addresses the needs of the economy”, and after all, someone had to bite the long-term capital gain tax bullet.
“It is not a political budget. If we see the financial condition, the services sector is doing good. There has been improvement in the manufacturing sector, including core sectors. It is natural that we identify the weakest sections and use resources to better these sectors,” Jaitley said.
“Agriculture was one of the sectors which were problematic. Reforms were needed to improve farmers’ lives. We are trying to put forward a comprehensive solution rather than a band-aid solution to farmers’ distress,” he said, and added that the NDA government was keen on expanding roadways, railways and airways, while keeping their fiscal deficit in line with its target.
Justifying the introduction of long-term capital gain tax, he said it was appropriate moment to introduce it.
“As far as long-term capital gain is concerned, if you look at the figures of last year, Rs 3.67 lakh crore is the profit and not a rupee of tax is paid. Is it equitable that so much profit is made but doesn’t make tax? Someone had to bite the bullet, and this was the most appropriate moment for it,” Jaitley said.
And he dismisses the notion that market or investors will react in a negative way.
“If our economies grow by 7.5% and our markets do well, this will serve as the attraction to the investors. We have to balance this with other considerations that how far is it equitable to allow the wealthiest to go tax free,” Jaitley said amidst the fear that security transaction tax (STT) and LTCG tax will make stock trading unattractive for the investors.
Despite fiscal deficit increasing to 3.5 per cent, overshooting the Budget expectation of this year and a dip in GST collection by Rs 50,000 crore, Jaitley said he is confident of meeting high growth and containing fiscal deficit to 3.3 per cent for the next year.
“This year’s Budget accounts for 11 months of GST revenue collections, which has had an impact on fiscal deficit. Next year it will be for 12 months,” the Finance Minister said, adding that India will grow between “7.2 to 7.5 per cent”.
He cited fall in revenue collection as one of the reason for not decreasing corporate tax. “We had said we will work on reducing corporate tax. However, the tax exemptions that we had in mind were not facilitated, and hence, we could not address this issue. Bringing the SME sector into tax relief bracket was necessary to support them,” he said.
About reforms for the middle-class, Jaitley said “India already has the lowest income tax slab in the world. There was no possibility to change it.” In every Budget, surplus money is being “put into the hands of the middle-class taxpayer”.
“The healthcare scheme we have provided can ensure that there is an insurance card in the pockets of the poorest people among the country. They can go to any hospital and get treatment worth Rs 5 lakh. If the world can replicate this, people cannot doubt that Modicare has been successful,” Jaitley said.
However, he did not rule out the immediate challenges, which according to him is high oil Price and inflamatory pressure.
“We have been able to bear the shock of rising oil prices as of now. Some excise duty decline has been adjusted as cess,” he said.
He, however, ruled out that increasing MSP for the farmer will fuel food inflation. “The increase in base price of a commodity increases the selling price as well. India has had a history of exorbitant inflation rates but now we have contained it. MSP increase will not wipe away farmers’ problems but it will contribute largely to it,” he added.