The year 2016 was full of major developments for the Indian economy. The country saw high-value currency notes decommissioned by the RBI under the demonetization drive to tackle the issues of corruption, black money, and terrorism. One unwanted side-effect of this initiative was the impact that it had on the entire economy across multiple market segments; the GDP growth projection for India was reduced by 0.6% by the World Bank, while the IMF cut down on its estimate by 1% to 6.6% in the months following the move. As such, the presentation of the Union Budget 2017 was preceded by a great deal of expectations from the public as well as various industries in the corporate sector.
Amidst hopes of a standout budget, the Finance Minister has introduced several critical reforms aimed at increasing domestic consumption and bringing the economy back on track for high GDP growth. Significant income tax exemptions were granted to Indian citizens belonging to the middle-income groups, while major business-centric policies were announced to give much-needed relief to the country’s enterprises post-demonetization.
Talking in terms of specific policies, the increase in fund allocation for women’s skill development initiatives to INR 1.84 lakh crore for the 2017-18 fiscal is a particularly commendable move. It will empower women across the country and help them in becoming active contributors in the country’s growth. This will be complemented by the move to increase the participation of women in MNREGA, another development that will bolster the participation of women as skilled workers in the rural sector and generate sustainable employment opportunities for them.
The allocation of INR 10,000 crore for the BharatNet project is also promising, as it will bring high-speed internet connectivity to rural citizens in nearly 150,000 gram panchayats through Wi-Fi hotspots. Furthermore, the budget’s focus on offering training in market-relevant, industry-specific skills to the youth and setting up 100 international skill centers in the country is a positive move. As India bolsters its position in the global market, there is a growing need for skilled workforce in the country. The emphasis on scientific and technological training, and the launch of SWAYAM, will empower India’s youth with the skill-set needed to meet the challenges posed by a fast-growing economy.
MSMEs contribute around 38% of India’s GDP and employ over 800 lakh people at present. This is what makes the reduction in corporate tax for MSMEs with annual turnover up to INR 50 crore to 25% such a welcome move. According to the budget estimates, the tax reduction will benefit nearly 96% business in the industry. Given that corporate tax is one of the major expenses for the country’s MSMEs, the cut in tax rates will promote greater growth within the sector and will allow Indian businesses to become more competitive globally. Increasing the period for profit-linked deductions to three years out of seven years as against five years is also extremely positive news for the country’s entrepreneurial landscape. Most start-ups do not generate any profits for the first few years of their operations. In that context, increasing the consideration period to seven years is set to benefit emerging ventures across the country and promote entrepreneurship on a much larger scale.
The Union Budget 2017 reinforces the government’s faith in technology for achieving national development goals, and focuses on infrastructure and empowering start-ups and SMEs. Although the IT industry’s expectations on proposals of facilitating infrastructure remain largely unmet, the budget does lay emphasis on boosting digital payments and promoting a transparent business environment. Increasing the focus on stepping up cyber security will be critical to facilitate the digital transformation of the economy.
The setting up of Payment Regulatory Board by RBI to replace BPSS (Board for Regulation and Supervision of Payment and Settlement Systems) as the regulator of electronic payments is also a promising development in the nation’s quest to become a less-cash and digital-first economy.