Moneycontrol
Last Updated : Mar 03, 2016 06:05 PM IST | Source: Moneycontrol.com

Budget 2016: Cheer for farmers, salaried get peanuts; no extra bank recap

The farming sector has been allocated around Rs 36,000 crore, while spending on irrigation has been trebled to around Rs 17,000 crore. Around Rs 5,500 crore has been earmarked for the crop insurance scheme, and Rs 19,000 crore for rural roads.

Moneycontrol Bureau

As widely expected, Budget 2016 had an overwhelming thrust on the rural sector which has been badly hit by the double whammy of twin droughts and unseasonal rains. Also, the Finance Minister chose to tread the path of fiscal discipline by sticking to the fiscal deficit targets of 3.9 percent for FY16 and 3.5 percent for the coming year.

However, it was a mixed bag, which among other things was expecting a higher bank recapitalisation figure than the scheduled Rs 25,000 crore for FY17, and a greater push for infra spending to boost the investment cycle. Also, the proposal to tax dividends above Rs 10 lakh in the hands of the investor and increase in securities transaction tax for options trades have come as dampeners.

A slight relief was the absence of the dreaded increase in tenure for long term capital gains tax.

Given the constraints arising out of the impending implementation of the Seventh Pay Commission Report and One Rank One Pension, expectations from the Budget were anyway low. In that sense, the Budget was pretty much on expected lines.



The salaried class would have reason to feel disappointed with the Budget, given that there was barely anything in it for them.

For those with annual income below Rs 5 lakh, the rebate under section 87A has been increased to Rs 5000 from Rs 2000. Also, the exemption limit for payment towards rent has been raised to Rs 60,000 from Rs 24,000. But the catch here is that only those who do not get house rent allowance and do not own a house will be eligible for the higher limit.

The market was hoping that the Budget would allocate more than the Rs 25,000 crore marked for recapitalisation of banks, in FY17. But the Finance Minister chose to maintain a status quo while maintaining that the government was committed to easing the stress in the banking system. This triggered a sell-off in bank stocks.

The higher allocation for the rural sector and farming was required considering that rural recovery is key to overall GDP growth. Yet, it remains to be seen whether these measures in themselves can help revive rural demand anytime soon.

The farming sector has been allocated around Rs 36,000 crore, while spending on irrigation has been trebled to around Rs 17,000 crore. Around Rs 5,500 crore has been earmarked for the crop insurance scheme, and Rs 19,000 crore for rural roads.

In addition, close to Rs 87,000 crore has been allocated for rural development and around Rs 2.87 lakh crore has been proposed as grants for rural bodies in FY17.

The Budget proposes to spend another Rs 1.51 lakh crore on the social sector including education and health care.

Analysts have been maintaining that a rebound in the property sector is key to demand recovery in rural India, and that is not going to happen in a hurry.

Even while sticking to the fiscal deficit target of 3.5 percent for FY17, the FM has tried to do his bit for infrastructure spending. A total of Rs 97,000 crore--including Pradhan Mantri Gram Sadak Yojana-- has been earmarked for roads in FY17.
First Published on Feb 29, 2016 01:31 pm
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