Budget 2017-18, presented by Finance Minister Arun Jaitley on Wednesday has three significant changes embedded in it but the significant change above all these cosmetic features is the progressive improvement in spirit.
First, presentation of Budget advanced to 1st February to enable the Ministries to operationalise all activities from the commencement of the financial year.
Secondly, merger of Railways Budget with General Budget to bring Railways to the centre stage of Government’s Fiscal Policy.
Thirdly, removal of plan and nonplan classification of expenditure to facilitate a holistic view of allocations for sectors and ministries.
At macro level, India’s Current Account Deficit declined from about 1% of GDP last year to 0.3% of GDP in the first half of 2016-17. FDI grew 36% in H1 2016-17 over H1 2015-16, despite 5% reduction in global FDI inflows.
Foreign exchange reserves have reached 361 billion US Dollars as on 20th January, 2017, which the government said would be sufficient to meet the needs of the country for the next 12 months. On demonetisation, it said the war against black money would continue on path of fiscal consolidation, without compromising on public investment.
The Indian economy, however, faces challenges in the next financial year as the world economy as such is facing considerable uncertainty, in the aftermath of major economic and political developments during the last year.
The US Federal Reserve’s , intention to increase policy rates in 2017, may lead to lower capital inflows and higher outflows from the emerging economies and uncertainty around commodity prices, especially that of crude oil, has implications for the fiscal situation of emerging economies, it said, indicating higher petrol prices in the coming year.
It also forewarned about the signs of retreat from globalisation of goods, services and people, as pressures for protectionism are building up, possibly hinting at US new president Donald Trump’s latest steps to stifle IT companies.
Otherwise, the benefits people expected from the Budget remained insignificant in view of individual income tax calculations. The middle class which is easily in a position to see more than Rs.5 lakh income on an average will have to pay 10 to 20% tax. But still, this is lower than what they paid during the budgets of Pranab Mukherjee and Chidambaram in the past.
Though there is no increase or reduction in Service Tax, which is at 15% now, the purchasing power of the middle class will be lukewarm as was seen after the demonetisation. Essentially, the benefits of demonetisation are not passed on to the people or tax payers as expected in the Budget 2017.