While his predecessor P Chidambaram used his wit and couplets to airbrush an inactive government that was indifferent to public needs, Union Finance Minister Arun Jaitley (who seemed to be unwell like the current economy) admitted to the reality of fiscal deficit target of 4.1% of GDP, and added that he aimed to narrow it down to 3.6% by 2015-16 and 3% by 2016-17. But how? To achieve the 4.1% target itself, he may have to go in for heavy PSU disinvestment, and non-tax revenue.
Jaitley, I think, has done his homework and realised that scrapping populist schemes and targeting downsizing expenditure may not work.
At the same time, impending hurdles in raising tax revenue or truncating social sector schemes are also non-populist. Naturally, a prudent FM has to look upon the burgeoning stock market and maha ratna, navaratna PSUs and government banks.
Has he disappointed the voters, who wanted change and had high expectations? The general sense is that he could have done better.
His announcement that the government will not introduce any retro amendment in taxation; strengthening authority for advance ruling in tax; and changes in transfer pricing regulations will bring clarity and confidence among investors.
Apart from hiking FDI limits for insurance and defence at 49%, Jaitley gave a very big push to infrastructure by creating a long term fund pool for infrastructure developers and encouraging banks to give long term credit for the infrastructure sector, including development of roads and expressways.
Much required emphasis has also been given to the agriculture sector with various reforms like 3% tax subvention for farmers who pay up on time; `5,000 crore allocation for warehousing; and long term rural credit fund to be started by NABARD.
On the personal tax front, exemption limit has been raised to `2.5 lakh from the current `2 lakh for taxpayers below 60 years. And the exemption limit for senior citizens has been hiked from `2.5 lakh to `3 lakh.
While education cess will stay at 3%, investment limit under Section 80C has been hiked to `1.5 lakh from the current `1 lakh.
Exemption on housing loans interest on self-occupied property has been increased from `1.5 lakh to `2 lakh. But this may not have much impact as borrowers who have taken housing loan with annual EMIs of more than `1.5 lakh may have let out the house on rent and claimed actual interest.
Vedanth Ramanujam
Chartered Accountant