Understanding the Budget 2016-17- Boon or bane?

The Union Ministry of Finance presented the Budget in Parliament last week and as always, there has been a lot of debate surrounding the schemes it introduced, their viability and the general inclination of the budget. Many have touted this year’s budget as ‘pro-poor’. While that is not a bad thing, there have been allegations that the government, while trying to shake off the tag of being a ‘suit-boot sarkar’ (elitist government), has presented a budget highly skewed in favour of farmers and the poor but rather tough on the middle class and salaried classes.

The sectors which the government now wants to promote may be deciphered by seeing a list of items which will become more expensive and which ones cheaper. Items such as footwear, solar lamps, routers, modems, set top boxes, braille paper, disposable sterilized dialyser and micro barrier of artificial kidney, sanitary pads, digital video recorder, CCTV cameras, hybrid electric vehicles, and locally made microwave ovens will be cheaper. On the other hand, eating out, movies, telephone bills, air travel, cigarettes, e-readers, desktops, laptops, locally manufactured mobiles, jewellery, industrial solar water heater, mineral water, aerated drinks, and readymade garments will be more expensive.

It is evident from the above information that the middle class ‘luxuries’ of enjoying a meal in a restaurant, going to the cinema or shopping for clothes will all come at a greater price. The budget has introduced many steps to encourage agriculture and improve the farmers’ lot- for instance, there is a proposal to have a Unified Agricultural Marketing ePlatform which will serve as a common e-market platform for wholesale markets.

Another feature of the budget that has stoked controversy is the tax proposed to be imposed on Provident Fund (PF) corpus created after April 1, 2016. 60% of the corpus will be taxed on withdrawal. The government has suggested that people can put the taxable 60% corpus into an annuity to be able to earn a monthly pension for life. This, the government believes, will restrict the tendency of private sector employees to withdraw all the money from the PF after retirement and instead, will enable them to switch to the security of a regular pension. Notably though, this pension will be fully taxable as well.

People however, are livid with the proposal of tax on the PF corpus and argue that the government should not dictate how they spend their own savings. While the budget speech is long over, the debate on this issue is raging and the government is reconsidering the imposition of this tax. A new proposal on this is likely to come out soon. Until then, the common man can wait and watch….hoping for a more favourably ‘budgeted’ outcome…