Budget 2016 Live: Jaitley's has delivered his economic mantra, a year we will know how good it was

Social security

Firstpost senior editor Akshaya Mishra says: It’s heartening that the government is giving attention to social security or the safety net. It’s not spoken of as much in India as in western countries but it’s critical to any economy preparing for structural changes – from farming to manufacturing to services – and the consequent financial and social disruption caused by them. We are still a long way to go. But the thinking is in the right direction.

The opposition isn’t happy with the Budget. Of course, that is almost ritual by now. What comes through in Jaitley’s Budget is the good intent. But good intent needs to translate into good implementation on ground. But the basic question remains: will the government be able to achieve what it has promised without overstepping the fiscal red line it has drawn for itself by a big margin? It seems to be a tough ask.

Budget positive for bond markets

Ramesh Damani, market expert: We live in a world that hates uncertainty. India adheres to the path of fiscal prudence and sticks to the path that is good for India. Borrowing figure is lower than last year will be taken postively by bond markets. 

Ashok Wadhwa, CEO, Ambit Holdings: He has announced an amnesty scheme. Historically amnesy scheme can collect 0.2 and 0.8 percent. On the personal side, thankfully not brought the long-term capital gains tax. 10 pecent more tax for those who earn 10 lakhs. Overall, a decently balanced budget from tax perspective

Budget scores politically, but numbers bear scrutiny

@TheJaggi says: On balance, the budget presented by Arun Jaitley is probably his best so far. Politically, it is the right direction, and economically it is difficult to fault spending on infrastructure and rural areas.

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The middle taxpaying class should not be unhappy even without a raise in the tax-exempt limit in general, but lowest bracket gets a small Rs 3,000 relief.

If the tax amnesty schemes generate large resources, the numbers will add up, but not if they fail.

If the incentives to the organised sector enable more companies to expand employee base, it will benefit the neo middle classes the most – jobs at the bottom end of the strucuture, that pay under Rs 25,000 per month.

The fiscal devil in the fine print will, however,  need closer scrutiny.

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Broadly, this budget sends a political message from Narendra Modi that the NDA is about the poor and not the rich. This is the first shot in his 2019 election campaign.

Flexible FRBM surprises everyone

Firstpost executive editor Ajay Singh says: Arun Jaitley’s insistence to maintain flexibility in the FRBM would come as a surprise for those who thought that the minister would adhere to targeted figure of fiscal deficit. His decision to review the functioning of the FRBM appears to be an outcome of the government’s view to divert more funds for social expenditure. This is an important decision as the government would have additional fund to play with on its social commitments.

Congrats @arunjaitley Ji for changing direction of budget speech from small geographic&sectoral announcement to broad focus plan#Budget2016

— Devendra Fadnavis (@Dev_Fadnavis) February 29, 2016

Jaitley avoids rural distress in Delhi’s backyard

Firstpost executive editor Ajay Singh says: Just as union finance minister Arun Jaitley began painting an optimistic picture of the India economy against odds of downturn of the global economy, he has cautiously avoided the mentioning of the rural distress in Delhi backyard-Uttar Pradesh.

There were unmistakable signs that in the budget-making of this year, the lurking shadow of the UP election to be held next year guided the economic policies. Having lost Bihar elections, Jaitley was not oblivious to the fact that in the rural dominated Uttar Pradesh, the party’s support base of 2014 has been gradually slipping away.

Barely two hundred kilomteres away from Delhi, there have been reports of famine deaths in Bundlekhand on account of successive failure of crops. The entire region has been reeling under severe economic distress which is unprecedented. The similar situation persists in West UP and Eastern parts of the state. Jaitley’s emphasis on rural sector seems to be an attempt to win over a large section of the rural populace which seems to have alienated from the Centre and the state government in equal measures.

BJP shedding urban bias

Firstpost senior editor Akshaya Mishra says: The BJP is shedding its urban bias. Its economic policy, as reflected in Jaitley’s announcements so far, would disappoint many economists looking for drastic reforms. Right now it’s an UPA budget, minus the in your face populist spending. It could be the pressure of politics. But there’s nothing to complain about.

BJP shedding urban bias

Firstpost senior editor Akshaya Mishra says: The BJP is shedding its urban bias. Its economic policy, as reflected in Jaitley’s announcements so far, would disappoint many economists looking for drastic reforms. Right now it’s an UPA budget, minus the in your face populist spending. It could be the pressure of politics. But there’s nothing to complain about.

Plan to use #tech in taxation dept. in a big way: FM #VikasKaBudget #Budget2016

— PIB India (@PIB_India) February 29, 2016

11 new benches of tax tribunals to be established to reduce pendency: FM

Sensex shocker

Stock market loss widens; Sensex crashes over 600 points and Nifty down over 200 points on Budget taxation proposals.

Penalty to be 50% of tax in income under-reporting cases, 200% in misreporting of facts: Jaitley

Monetary limit for cases to be decided by 1-member bench up from 15 lakh to 50 lakh rupees: FM #VikasKaBudget #Budget2016

— PIB India (@PIB_India) February 29, 2016

Dividend tax raised for the rich

@TheJaggi says: Promoters who pay less tax due to the dividend distribution tax that is paid by the company will now face a 10 percent additional tax when dividend payments exceed Rs 10 lakh. This will sting big promoters, who were not the intended beneficiary of the dividend tax.

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Luxury cars will be taxed more, and there will be a special infrastructure cess on certain cars and also diesel cars.

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Speculators will be stung with the raise in the securities transaction tax on options of 0.05 percent – a three-fold rise.

Committed to provide a stable and predictable taxation regime: Jaitley 

Limited period compliance window for taxpayers to declare undisclosed income. Declarations to have immunity from prosecutions #VikasKaBudget

— Ministry of Finance (@FinMinIndia) February 29, 2016

Govt to introduce bill to amend Companies Act for ease of doing business; to enable registration of cos. in a day: FM. #VikasKaBudget

— Ministry of Finance (@FinMinIndia) February 29, 2016

No big announcement for banking sector yet

Firstpost Dinesh Unnikrishnan says: For fiscal 2017, Jaitley announced a capital infusion of Rs 25,000 for government-banks, which is part of the Rs 70,000 crore announced for five years announced in last year. Jaitley also promised to examine the option to bring down government stake in  1DBI bank below 51 percent.
 
One needs to wait for details though. Jaitley, as finance minister, has failed so far to get hold of the root of the problems that has engulfed India’s Rs 95 trillion banking industry. He underestimated the capital needs of state-run banks in the initial days of this NDA government when he allocated merely Rs 11,200 crore and refusing to think of radical reforms in the baking sector such as merging small banks having synergy and bring in private capital.

His banking sector strategy fell short of what was needed to revive state-run banks. Though Jaitley recognised the issues later and offered more capital (Rs 70,000 crore over five years), it came too late and too little. India’s banking industry, 70 percent dominated by state-run banks, is in the midst of a crisis now with their total bad loans exceeding Rs 400,000 crore at the end of December and more likely to come from the restructured loan segment if economic recovery doesn’t happen as expected.

Krishi Kalyan Cess to be imposed on all taxable services for agricultural sector: FM @arunjaitley #VikasKaBudget

— Ministry of Finance (@FinMinIndia) February 29, 2016

#CleanEnergy cess to be renamed to #CleanEnvironment cess, increased from 200 to 400 rs/ton of coal: FM #VikasKaBudget #Budget2016

— PIB India (@PIB_India) February 29, 2016

Meanwhile Sensex disappoints 🙁

Meanwhile, Jaitley seems to have failed to cheer the investors. The stock market has fallen. The Sensex 23,001, down 153 points and the Nifty 6977, down 55 pts.

According to Hemal Zobalia, Partner, Deloitte Haskins & Sells LLP, announcement of amending Motor Vehicles Act to remove/ reduce permit raj and allow more private players for passenger traffic will boost entry of private players especially for group/mass transportation. This could help mitigate people’s concern on lack of adequate public transport system.
 

Service tax

Service tax exemption for construction of affordable housing upto 60 sq. m. under state and central housing schemes, says Jaitley. 

Earlier: 12%, Now on : 15% - surcharge on income tax for those with incomes exceeding 1 crore per annum: FM #VikasKaBudget #Budget2016

— PIB India (@PIB_India) February 29, 2016

Presssing the right buttons

Firstpost senior editor Akshaya Mishra says: So far the Finance Minister has hit all the right buttons. Going by the announcements made by Jaitley, his could well be a budget of socialists. NREGA spending is up, there is emphasis on the farm sector, the rural sector gets due attention and the urban poor also is on the FM’s radar. He talks of fiscal discipline. The opposition shouldn’t have much to complain about. The devil is, however, is in the detail. Let’s wait for the fine print.

Relief to those in rented houses: deduction raised from 24,000 to 60,000 Rs. under Section 88G - FM @arunjaitley #VikasKaBudget #Budget2016

— PIB India (@PIB_India) February 29, 2016

Corporate income tax:
Incentives for new manufacturing companies and relatively small enterprise companies: FM @arunjaitley #VikasKaBudget

— PIB India (@PIB_India) February 29, 2016

Firstpost executive editor Ajay Singh says: Arun Jaitley’s insistence to maintain flexibility in the FRBM would come as a surprise for those who thought that the minister would adhere to targeted figure of fiscal deficit. His decision to review the functioning of the FRBM appears to be an outcome of the government’s view to divert more funds for social expenditure.  This is an important decision as the government would have additional fund to play with on its social commitments.

Here come the aam aadmi and corp tax benefits

@TheJaggi says: Taxpayers in the sub-Rs 5 lakh income bracket will get a tax rebate of around Rs 3,000. Two crore taxpayers will benefit.

Those without a house will get an HRA like deduction of Rs 60,000 – up from Rs 24,000, under section 87a.

Corporate tax rates for small companies down to 29 percent.

#Taxproposals to provide relief to small taxpayers through rebates. #VikasKaBudget

— Ministry of Finance (@FinMinIndia) February 29, 2016

Jaitley sticks to fiscal roadmap, but….

@TheJaggi says: Arun Jaitley said in 2016-17 he will bring the fiscal deficit down to 3.5 percent, but given high allocations for many sectors, there could be a devil in the detail.

The numbers to watch are nominal GDP estimate, which, if made high, will allow deficit to look smaller. Also there could be over-estimation of revenues or underestimating of expenses.

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He has said Seventh Pay Commission gets only interim provisions, which means he could have underprovided here.

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The Fiscal Responsibility act will be made more lexible in future.

Necessary interim provisions made for implementation of 7th Pay Commission recommendations: FM @arunjaitley #VikasKaBudget #Budget2016

— PIB India (@PIB_India) February 29, 2016

More no. of benches of Security Appellate Tribunal to be introduced by amending SEBI Act to reduce pendency:FM @arunjaitley #VikasKaBudget

— Ministry of Finance (@FinMinIndia) February 29, 2016

Initial sum of 100 crore each for celebrating birth anniversary of #DeenDayalUpodhyaya, Guru Gobind Singh Ji:FM @arunjaitley #VikasKaBudget

— PIB India (@PIB_India) February 29, 2016

FM @arunjaitley :Fiscal deficit for FY 2016-'17 targeted at 3.5% #VikasKaBudget

— Ministry of Finance (@FinMinIndia) February 29, 2016

Jaitley proposes comprehensive exit policy

@TheJaggi says: The Economic Survey talked about India transitioning from limited entry to “marketism with no exit”.

Jaitley has proposed a strong exit policy which will involve legislating the Indian Financial Code and the Bankruptcy Code and quicker disposal of debt recovery cases in debt tribunals.

Banks will be recapitalised by Rs 25,000 crore this year, which is a substantial step-up from last year. Government will also try to bring its stake in banks below 50 percent, especially in IDBI Bank. But a lot will depend on legislation to change the bank nationalisation laws.

Total expenditure increased by 11 per cent Rs 19.78 lakh crore in FY2017 from Rs 17.77 lakh crore as per BE FY2016

Rs 25,000 cr for state-run banks; Jaitley fails to cheer again

100% FDI through FAPB route in marketing of food products produced and manufactured in India: FM @arunjaitley #VikasKaBudget #Budget2016

— PIB India (@PIB_India) February 29, 2016

A new policy for management of assets of public enterprises: FM @arunjaitley #VikasKaBudget #Budget2016

— PIB India (@PIB_India) February 29, 2016

Public sector will be asked to divest excess land, assets

@TheJaggi says: Jaitley is renaming Disinvestment Dept as Dept of Investment which means not much privatisation may take place. But existing PSUs may be asked to sell their land and subsidiaries to fund themselves – in other words, the disinvestment will be of assets and not the companies themselves.

Govt is drawing a comprehensive plan to be implemented in the next 15-20 years for exploiting Nuclear energy:FM @arunjaitley #VikasKaBudget

— Ministry of Finance (@FinMinIndia) February 29, 2016

Allocation for bank recapitalisation Rs 25,000 crore as announced earlier as a plan of Indradhanush programme

Financial Data Management Centre for integrated data collection and analysis: FM @arunjaitley #VikasKaBudget #Budget2016

— PIB India (@PIB_India) February 29, 2016

Biggest infrastructure push ever – Rs 2.2 lakh crore

@TheJaggi says: Jaitley’s job push is being backed up by massive investments in railways and roads. While Rail Minister Suresh Prabhu has already announced an investment of Rs 1.21 lakh crore. Jaitley added another Rs 70,000 crore for roads, including Rs 15,000 crore investment by NHAI, and an additional Rs 27,000 crore for rural roads.

Infrastructure push will also boost jobs and growth as road and railway investments tend to have high employment potential.

Here are the big job creating proposals

@TheJaggi says: In order to get the organised sector to recruit more people, companies will be spared the payment of 8.33 percent pension scheme contribution for all new employees for three years.

Rural distress shows: Infra spending takes 12% hit

The rural distress shows in the spending. Any doubt check the infra spending. Allocation for infrastructure stands at Rs 2.21 lakh crore against last year’s Rs 2.51 lakh crore. This is down 12 percent. Rural distress shows: Infrastructure spending takes a 12 percent hit.

According to Firstpost financial editor Dinesh Unnikrishnan, for fiscal year 2017, Jaitely set aside Rs2.21 crore crore for the infrastructure sector , down 12%, compared with Rs2.51 lakh crore . Jaitley said Rs55000 crore for roads and railways and another Rs15000 crore from bonds will be raised by NHAI. For Railways and roads , in 2016-17, will be Rs2,18,000 crore. This should be noted because Jaitley’s big task remains making sure engines of economic growth aren’t failing. This year, the increase in infra spending is merely Rs30000crore as against RS70000 crore last year, which isn’t so encouraging.

Allocation for infrastructure Rs 2.21 lakh crore against last year’s Rs 2.51 lakh crore , 12 per cent down

What BJP thinks?

Firstpost editor BV Rao says: This is the first, direct and biggest internal challenge to prime minister Modi and his confidant and party president, says Amit Shah. In yesterday’s parliamentary board meeting of the BJP held in Delhi, a regular review was done. Sources say it was a routine drill where in everybody said that the party had tried hard and fought hard in the Bihar election but it was beaten by the caste arithmetic conjured up by the Nitish-Lalu combine.
The parliamentary board also ’thanked’ party president Amit Shah for leading the campaign by literally camping in the state. This is the normal drill when a political party loses elections and the BJP’s ‘review’ was no different from say the Congress party’s review after its full and complete decimation in 2014. The Congress party had then said that the UPA party and government had done a fabulous job but had failed to communicate the same to the electorate. Why, this has been the case whenever the BJP has lost elections before too. Election reviews are mostly tame, choreographed affairs where the members pat each other for the hard work and bad luck.

So what is different this time?

It is apparent that this time the difference is Narendra Modi. Since his arrival on the national scene, he has taken complete control of the party. The elders have been sidelined or kick upstairs to the Margadarshan Mandal as in the case of Advani.

This is the last battle that Advani and the other sidelined elders are doing in the war for political relevance.

According to Ajay Singh, Executive Editor, Firstpost, this revolt was brewing even before results day.

Arun Shourie’s open statements against the Prime Minister were a clear indication that something was brewing in the party. 
There was a foreboding of the Bihar defeat in the party and Modi and Amit Shah were aware of the many meetings between Advani, Arun Shourie, MM Joshi, Shanta Kumar and Yashwant Sinha (whose son Jayant Sinha is minister of state for Finance).
It is because of the knowledge of these series of secret meetings that Modi made it a point to visit Advani’s house on counting day, also the octagenarian’s birthday, to wish him. Modi and Shah were clearly anticipating trouble if the results came out bad.

The results were not just bad, but terrible. So, even as the Advani revolt was in the works, a meeting of the Parliamentary Board was quickly called, even as counting was underway. The idea was to quickly organise a meeting of the parliamentary board to demonstrate unity of thought and to distribute discredit for the rout.
Once the parliamentary board said that it was the collective responsibility of every body, it was thought, the sting would be taken out of any moves to embarrass Modi and Shah.

That is why, the language of the letter released by the rebel group is very pertinent. It says that since only Modi and Shah would have cornered all credit if the party had won, they and only they, deserve to carry the cross of electoral humiliation in Bihar.

Meanwhile, sensing that the elders were in no mood for a climb down, desperate efforts were made to quell the revolt by reaching out to the parent body, the RSS.

While Amit Shah met RSS chief Mohan Bhagwat, Rajnath Singh met Krishna Gopal, the RSS senior in charge of BJP. Obviously none of this bore fruit because Advani and the other elders, firmly pushed to the sidelines of the party, did not want to let go of their best chance to hit back.

Notably, none of these elders were the greatest of friends in the prime of their careers in the BJP. For example MM Joshi was always at loggerheads with Advani. Arun Shourie at one time said, when Advani was not yet quite the titular head that he is now, that the RSS should take over the party. Yashwant Sinha also opened questioned Advani many times. But all of them were united by their dislike for Modi and the way he had a stranglehold on the party and government. 

It is thus clear that this is a fight to the finish. These elders are obviously going to the push things to the point of no return. It remains to be seen if Modi-Shah will be willing to negotiate or go for broke.

Through his campaign in Bihar Narendra Modi would say that if BJP was elected to power they would enjoy Diwali two times over. It now seems like there won’t be much of a Diwali for BJP to celebrate.

National Skill Development Mission has imparted training to 76 lakh youth. 1500 Multi skill training institutes to be set up #VikasKaBudget

— Ministry of Finance (@FinMinIndia) February 29, 2016

Economic empowerment of SC/ST as a tribute to Dr. B.R. Ambedkar's 125th birth anniversary: FM @arunjaitley #VikasKaBudget

— Ministry of Finance (@FinMinIndia) February 29, 2016

SENSEX CONTINUES TO BE IN THE RED. DOWN 88 POINTS

Model Shops & Establishments Bill coming soon

This would allow small shops to open all 7 days a week of course with due care for the offs and leaves of employees.

A #HigherEducation Financing Agency to be set up, with a fund of 1000 crores: FM @arunjaitley #VikasKaBudget #Budget2016

— PIB India (@PIB_India) February 29, 2016

A Digital depository for school leaving certificates: FM @arunjaitley #VikasKaBudget #Budget2016

— PIB India (@PIB_India) February 29, 2016

1700 crores for Pradhan Mantri Kaushal Vikas Yojana: FM @arunjaitley #VikasKaBudget #Budget2016

— PIB India (@PIB_India) February 29, 2016

75 lakh households gave up LPG subsidy

In the time of Rohith Vemula, steps unveiled to support SC-ST entrepreneurship. The government proposes to earmark Rs 500 crore for this.

Jaitley’s rural push continues

@TheJaggi says: The FM promises Rs 2.87 lakh crore fiscal transfers to villages, and all villages to be electrified by 2018. This government obviously believes in doing things in mission mode. After Jan Dhan, now it is time for full electrification and taking cooking gas to all rural households.

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NREGA, once the bugbear of NDA, has now come centrestage with allocations of Rs 38,500 crore.

Jaitley also focuses on health insurance for all.

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Dalit entrepreneurs to be empowered with support hub under small and medium sector categories.

FM @arunjaitley : 100 % village electrification to be achieved by 1st May, 2018 #VikasKaBudget

— Ministry of Finance (@FinMinIndia) February 29, 2016

FM @arunjaitley : 100 % village electrification to be achieved by 1st May, 2018 #VikasKaBudget

— Ministry of Finance (@FinMinIndia) February 29, 2016

Nat'l SC/ST Hub in partnership with @minmsme & industry associations to support SC/ST entrepreneurs: FM #VikasKaBudget #Budget2016

— PIB India (@PIB_India) February 29, 2016

62 new Navodaya Vidyalayas coming

#VikasKaBudget #Budget2016: Rs 35,984 allocated for Agriculture in 2016-17

— PIB India (@PIB_India) February 29, 2016

5 lakh acres to be brought under #organicfarming over a three year period: FM @arunjaitley #VikasKaBudget #Budget2016

— PIB India (@PIB_India) February 29, 2016

LPG mantra

That’s up 10 percent over the last year

Yes moral suassion works. 75 lakh voluntarily gave LPG subsidy, claims the finance minister. This is in response to the prime minister’s call earlier last year. 

Rural spending

On the whole rural spending is Rs 87,765 crore, as against last year’s Rs 79526 crore.

Allocation for rural development Rs 87765 crore last year Rs 79526 crore

Recapitalization of banks 

Recapitalization of banks will be done during next FY, during Budget 2016. We need to prioritize our expenditure, given recommendations of 7th Pay Commission and OROP implementation, says Jaitley.

MGNREGA gets highest amount ever

At Rs 38500 crore, Jaitley gives highest ever amount for MGNREGA, the ’living example of the Congress’s failure’.

Last year the figure was Rs 34699 crore.

‘Living example of Congress failure’ MGNREGA gets Rs 38500 cr

Third batch of innovation scholars to commence in-residence programme in Rashtrapati Bhavan from March 12, 2016, says Jaitley. 

Farm, rural sector, infra, social sector to have more Government expenditure : FM

In the time of distress Modi govt goes rural 

@The Jaggi says: Jaitley gives pride of place to farm sector rejuvenation, from higher outlays for irrigation to farm reforms. This is a key political message, that the BJP is going for a rural outreach to seal it position as the prime pole of Indian politics.

One wonders what he will do to retain the BJP’s urban base, including the neo middle class.

Rural push
Firstpost financial editor Dinesh Unnikrishnan says: Jaitley’s big rural push: Jaitely is playing the rural card when he highlighted several initiatives for rural India. Jaitley announced subsidy scheme for BPL families for cooking gas and said the government targets to double the income of farmers by 2020.  Jaitley allocated Rs 35,984 crore for farming sector. And RS86500 crore on irrigation. But implementaion is key.

Jaitley outlines govt’s 9 objectives this year

@TheJaggi says: Jaitley says the government has achieved its spending plans for 2015-16, which means lack of  government spending is not the reason for a further slowdown. He talks of firewalls to insulate India from global headwinds. Announces nine-point priorities of the budget:

1) Doubling farm incomes  in 6 years

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2) Strengthen rural economy

3) Investment in social welfare and health

4) Imparting education and job skills

5) Infrastructure investment

6) Financial sector reforms

7) Improved governance and focus on ease of doing business

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8) Fiscal discipline

9) Tax reforms to reduce burden of compliance.

Nothing unexpected so far. Only question is: is there money for all this?

As expected, the government is promising to enhance expenditure for social, rural and agri sectors. 

Until now the steps announced have been mostly about farm sector.

The government proposes to double farmers’ income in 5 years.  The focus is also on social sector especially health care, education and skill development.  It would enact law to give statutory backing to Aadhaar. Money is with the govt. It belongs to the people, increased the planned expenditure,” says Jaitley.

Firstpost executive editor Ajay Singh says: Union finance minister Arun Jaitley is endowed with gift of gab. That became evident when he started his budget by pointing out that how Indian economy has been standing its ground in face of downturn in the world economy. Since his felicity with words in Hindi and English is unparalleled, he quoted a urdu couplet to prove his point. Right at the beginning he started outlining the challenges faced by the government on account of successive failure of monsoons in the country. Though he seemed defensive, he camouflaged his arguments cleverly to advance the case of the government which is determined to overcome all odds.

Firstpost editor BV Rao says: Lot of hope around India thanks to our policies, says Arun Jaitley in opening remarks. Jaitley recounts what a bad legacy he was handed down by the UPA government: is he preparing ground for not being in position to do much? Or he is saying he will deliver a dream in spite of that? Aadhaar will get statutory backing, says Jaitley.

#Budget2016 Finance Minister Says: New Initiative To Support BPL Families With Cooking Gas Subsidy

— CNBC-TV18 (@CNBCTV18Live) February 29, 2016

Has prices comes down?

Firstpost financial editor Dinesh Unnikrishnan says: Jaitely claims the consumer inflation has come down under NDA-government. It has indeed, also due to a lower global crude prices . But, the fact is that the rural India is still struggling to deal with escalation in prices of essential food items, especially with record high pulse prices. So is there a real relief for the common man on prices?

The other tradeoffs Jaitley will have to make

@The Jaggi says: The second tradeoff is between accounting fact and fiction. All finance ministers try to make the deficit look small by pencilling in higher GDP growth and higher tax and non-tax revenues, including disinvestment receipts. In the last five years, no disinvestment target was anywhere near being met, and direct tax revenues have been falling short this year. What has saved Jaitley the blushes this year (2015-16) is the buoyancy in oil taxes, helped by falling oil prices. He can’t expect another bounty growth next year.

Another number fudge available to Jaitley is to give a higher (possibly unrealistic) estimate for the nominal GDP. The higher the nominal GDP, the lower the fiscal deficit as a percentage of GDP. Jaitley will be sorely tempted to try this trick in 2016-17, after this year’s very small difference between nominal and real GDP (nominal GDP is real GDP plus assumed/realised inflation).

If Jaitley takes too many liberties with assumptions about tax revenues, nominal GDP growth or disinvestment money, he will not be believed.

Obstructive politics

“Our external situation is robust. Performed amid worst global conditions and obstructive politics,” says Jaitley.

“The risk of global slowdwon is increasing. We have to create firewall against them,” the minister says.

Wading through global headwinds

Amidst all global headwinds, the Indian economy standsfirmly. IMF, World Bank laud India’s economic measures.

“We converted these challenges into opportunity,” says Jaitley.

Finance Minister Arun Jailtley rises to read out his Budget speech, but the din takes over. But he continues anyway.

Tonic for banking sector ills?
Firstpost financial editor Dinesh Unnikrishnan says: Perhaps, the most daunting task for Jaitley today is to get the banking sector problem right. Ever since he took over as Finance Minister,  Jaitely’s banking sector strategy has fallen short of what was needed to revive state-run banks. Though Jaitley recognised the issues later and offered more capital (Rs 70,000 crore infusion over five years), it came too late and too little. India’s banking industry, 70 percent dominated by state-run banks, is in the midst of a crisis now with their total bad loans exceeding Rs 400,000 crore at the end of December and more likely to come from the restructured loan segment if economic recovery doesn’t happen as expected.  Will he come with plans such as merging some of the banks and infusing more caital to save the day for sarkari banks?

Modi’s policy shift sees focus on poor, will he revert to Indira’s policies?

Reuters reported that Prime Minister Narendra Modi wants the budget to appeal to the rural poor, citing officials familiar with his thinking. The strategy shift that is aimed at boosting the BJP in coming state elections. However, this is likely to disappoint investors.

“We will have to reform the agriculture markets, invest more resources to deal with the agrarian crisis – all of this could be an integral part of this year’s budget,” said Ramesh Chand, a member of the planning body Niti Aayog that gave the finance ministry inputs.

Over the weekend, TN Ninan wrote (http://www.business-standard.com/article/opinion/t-n-ninan-narendra-modi-mark-ii-116022601200_1.html) in a clomun in Business Sandard: He (Modi) talks now of the poor, not the neo-middle class that featured in his campaign manifesto and in Arun Jaitley’s first Budget.

“In a search for a more secure political constituency, Mr Modi might even be tempted to revert to the failed policies of Indira’s time: trade protectionism, redistributive taxes that encourage evasion, and policies that favour government-funded investments rather than private sector recovery. One hopes not,” he said.

Here are the tradeoffs Jaitley will have to resolve while presenting the budget today

@TheJaggi says The first tradeoff is the one between public sector spending to push growth, and fiscal prudence. Having changed the fiscal roadmap once last year, he will need a very good reason to change it again this year, when the fiscal deficit is to be brought down to 3.5 percent in a year in which over Rs 1 lakh crore has to be paid to government employees – some of it through the railway budget.

Jaitley can plead that when private investment is not picking up, the public sector has to pick up the challenge. He is right, but he still has to convince the markets and rating agencies that he is no fiscal slacker. The best way would be to keep the fiscal deficit target at 3.5 percent in 2016-17 as planned, and show the one-time expenses on OROP and Pay Commission as an extraordinary item that is a minor blip. This is what companies do when they get sudden windfalls of big one-time expenses in any particular year.

Stay tuned, FM @arunjaitley to present #Budget2016 in Parliament shortly.@jayantsinha @FinMinIndia pic.twitter.com/2eSROLzTC1

— PIB India (@PIB_India) February 29, 2016

Budget2016 Live: Jaitley’s challenge will be to outshine the Eco Survey

@The Jaggi says: So, the one prediction we can make with a degree of assurance is that today’s budget will be about many tradeoffs and compromises – between reform and populism, between realism and make-believe numbers, between growth and fiscal prudence, between political exigencies and economic sense.

Put another way, Jaitley will be evaluated by the gap between the polished performance put up by his Chief Economic Advisor Arvind Subramanian’s much-appreciated Economic Survey and his actual budget proposals. The wider the gap, the more Jaitley will be critiqued. The worst nightmare for him would be for critics to say that the Economic Survey was the real thing, not the budget for 2016-17.

CABINET APPROVES UNION BUDGET 2016

Another big question

Firstpost financial editor Dinesh Unnikrishnan says: Another big question is this: Can Jaitley assure international investors with firm roadmap on how to take ahead the reforms process? Reform juggernaut is stuck in Parliament for long now on account of NDA-government’s weak position in Rajya Sabha. There has been no progress on big-ticket reforms such as GST, Land and Labour laws so far. This is a major reason for investor skepticism on Modi-government. Chances for the bankruptcy code looks more bright since it was introduced as a money bill in last session. But can Jaitley tell us what us what is government’s game plan for other large-ticket reforms?

Budget 2016: After two misses, this is Jaitley’s big chance to make amends

@TheJaggi says: Coming up in less than an hour, Arun Jaitley’s third effort will be scrutinised more closely than his first and second ones for the simple reason that both disappointed. If the first was merely a saffron-tinted version of the same ideas left behind by the UPA in its last (interim) budget, the second one had one major point of interest: the promise of a four-stage reduction in corporate taxes and the withdrawal of commensuatre tax breaks for favoured sectors or policies.

One should not envy Jaitley’s his job, for the third budget is when new finance ministers begin to let their hair down and start thinking about getting their bosses re-elected. Manmohan Singh firepower and reformist zeal lasted for two years (1991 and 1992), and the markets caught fire; but after that his budgets were pedestrian and run-of-the-mill. It is jaitley’s misfortune that he has to do two jobs in the third budget – show some reformist panache  and yet throw some populist elements in to keep the political wolves from snapping at his heels.

Firstpost financial editor Dinesh Unnikrishnan says: While it wouldn’t be a major problem for Jaitley to meet this year’s (fiscal year2016) fiscal deficit target, the big challenge lies for fiscal year 2017 when the burden of higher wage bills and likely higher capital infusion needed for state-run banks will weigh in. The task is even bigger with Reserve Bank of India governor, Raghuram Rajan warning the government that the growth cannot be driven by fiscal-deficit. At the same time, it wouldn’t be prudent fro Jaitely to think of a drastic cut in spending since the economic recovery is still at nascent stage. Its a tough task.

What the mutual fund industry wants?

The mutual fund industry is expecting  a Rs 50,000 increase in basic income tax exemption limit to Rs  3 lakh in the Budget. Will they get it? 

Prime Minister Modi has already failed his test in the first year: Kharge

“I hope Budget 2016 will give more money to the poor. Further cuts for infrastructure should not happen. There should be loan waiver to farmers. Whatever money was sanctioned for drought compensation was less. The farmers need more,” said Congress leader in Opposition Mallikarjun Kharge.

“The Prime Minister has already failed his test in the first year. This is his supplementary exam. Talks won’t do. There has to be work on the ground,“Kharge said.

Subsidy bill likely to climb up

Troubled times for the poor. To support the weaker sections, subsidy payouts are likely to see a rise. CNBC-TV18 says there are chances that the govt’s food subsidy outgo may jump up to Rs 1.5 lakh crore. Last year the amount was Rs 1,24,419 crore.

FM Jaitley met President Pranab Mukherjee for customary briefing on #UnionBudget2016 (Source: Rashtrapati Bhawan) pic.twitter.com/TVFymFuh4D

— ANI (@ANI) February 29, 2016

One hour to go for the Union Budget presentation, the market treading water. Investors keep their fingers crossed on any news on long-term capital gains tax. Sensex at 23,084.64, down 0.3 percent

FM Jaitley and MoS Jayant Sinha reach Parliament #UnionBudget2016 pic.twitter.com/MNhNil4kSJ

— ANI (@ANI) February 29, 2016

Bank capitalisation

Will Arun Jaitley set the record straight for bank recapitlaisation? According to a CNBC-TV18 report, the amount of caiptal to be infused into public sector banks could be between Rs 25,000 crore and Rs 50,000 crore. Last year, the amount was about Rs 8,000 crore. This had attracted criticism from various quarters. Even RBI raised the issue saying the amount is too small, considering the high Rs 4 lakh crore NPAs and Base-III requirement.

Copies of #UnionBudget2016 brought to Parliament pic.twitter.com/yUmWjUVQxF

— ANI (@ANI) February 29, 2016

Jaitley reaches Parliament

Union Finance Minister Arun Jaitley reaches Parliament. The minister will sit in a meeting with his cabinet colleagues to get the Budget document ahead of reading it out in Parliament.

Not a great start at the bourses

Sensex is at 23,137.21, down nearly 30 points. 🙁

Not a great start at the bourses

Stock markets are on the edge. There have been reports that Union Budget may propose an increase in tenure of long term capital gains tax on equities or may impose a 10 percent LTCG. According to Gautam Chhaochharia both the steps, if taken, will be a short term negative for the stock investors.

What the markets will be more btohered about is the quality and quantity of the spending by the govenrment as the RBI rate cut depends on that, he told CNBC-TV18 today.

Meeting the President

At Rashtrapati Bhawan, the finance minister along with his junior will brief President Pranab Mukherjee on the key ingredients of the Budget. This is protocol.

FM Arun Jaitley and MoS Jayant Sinha at North Block,leave for Rashtrapati Bhawan #Budget2016 pic.twitter.com/6XnrsvGuzh

— ANI (@ANI) February 29, 2016

‘Worked very hard’

We have worked very hard on #Budget2016 , under guidance of PM and FM Jaitley," says Minister of State for Finance Jayant Sinha. 

FM Arun Jaitley and MoS Jayant Sinha at North Block #Budget2016 pic.twitter.com/6c5k6brxxR

— ANI (@ANI) February 29, 2016

Delhi: Finance Minister Arun Jaitley on his way to North Block #Budget2016 pic.twitter.com/1EcZXHsFvE

— ANI (@ANI) February 29, 2016

Arun Jaitley reaches North Block

Carrying the hopes of billions for the next fiscal year (2016-17) safely locked in a attache suitcase, Union Finance Minister Arun Jaitley has reached his office in the North Block for a final meeting with his team before reading out the Budget 2016-17 in Parliament.