Daily Current Affairs – 2nd February, 2017

Daily Current Affairs – 2nd February, 2017

Annual Budget 2017


The Constitution refers to the budget as the ‘annual financial statement’. In other words, the term budget has nowhere been used in the Constitution. It is the popular name for the annual financial statement that has been dealt with in Article 112 of the Constitution.

For the first time since independence budget has dovetailed the railway budget. Along with this the abolition of the distinction between Plan and Non-Plan expenditure and its early presentation, Union Budget 2017-18 marks another break from tradition.

Focus areas of this budget

In light of the government’s ban of high-value currency notes that has dampened economic activity, particularly in the informal sector, it was necessary for the government to smoothen the economy with the current budget.

The budget has provided a long term framework to prevent regeneration of black money which was the main objective of the demonetization drive.

  • Keeping the welfare intent intact programmes and schemes for the vulnerable sections of society, the Finance Minister has done his best to reduce all problems faced by the people as a result of demonetization.
  • The tax rate for small and medium enterprises with an annual turnover of up to ₹50 crore has been slashed to 25%. This will give a boost to job creation.
  • Corporate sector has not been offered much in terms of lower tax rates.
  • Halving the personal income tax rate from 10% to 5% for those in the lowest tax slab of ₹2.5 lakh to ₹5 lakh not only puts more money in the hands of this segment, but is also a move to bring more people into the formal tax net.
  • Taxpayers other than the above have been given a rebate of ₹12,500 each.


There is a redistributive element in this budget with part of the revenue loss from above relief measures being funded by a 10% surcharge on the income tax of those in the income bracket of ₹50 lakh to ₹1 crore.

  • The government is of the opinion that the demonetization has helped transfer resources from tax-evaders to the government. Also, the income tax collections from advance personal tax have risen by 34% in the first three quarters of 2016-17, after recording single-digit growth in the previous two years.
  • The note ban has created a sense of fear in people who were evading taxes. Additional steps to tighten the hold over this category of people have been taken. These steps include:
  • Bar on cash transactions greater than ₹3 lakh
  • Pushing businesses to make all payments over ₹10,000 in digital format.
  • Rationalising the costs of non-cash payments.

Other measures:

  • The government has tried to give a push to the infrastructure sector by categorizing affordable housing under infrastructure. A few changes in the tax treatment have also been incorporated to incentivize builders. In addition to this, interest subventions already announced for low-ticket home loans, could increase construction activity and job-creation.
  • Higher allocation has been done for MGNREGA, irrigation and infrastructure projects.
  • The government has not tried to alter the indirect taxes since it aims to introduce the Goods and Services Tax (GST) in July.
  • N K Singh Committee which reviewed the Fiscal Responsibility and Budget Management (FRBM) Act has recommended deviations from fiscal deficit targets due to various structural reforms in the recent past.
  • The government however has stuck to its fiscal consolidation road map.

Not a Populist Budget

The government has avoided the tag of populism and taken steps such as the following:

  • A commitment to confiscate assets of big loan defaulters who have fled the country.
  • Clean up the electoral funding by reducing the cash donation limit from any one source to political parties from ₹20,000 to ₹2,000. However, the government has to make sure that there is also a cap on the number of anonymous donors.

Railway Budget – Initiatives and reforms

It was first since independence that a general budget was presented without a railway budget. The proposals under the rail budget including railway safety are:

  • A dedicated ₹1 lakh crore for five years for a safety fund – Rashtriya Rail Sanraksha Kosh. This fund can help in implementing measures suggested by expert panels such as the Kakodkar Committee.
  • Other focus areas proposed under the budget are:
  • Acquisition of advanced signaling for train control
  • Elimination of level crossings for smooth operations
  • Replacement of carriages of old design with the better-engineered carriages.
  • On the commercial side, passenger tariffs are to be calculated taking into account costs, social obligations and competition from other modes of transport.

Indian Railways should focus on using higher capacities on identified travel corridors to provide safe, comfortable and affordable travel for all. This can be done relying on a rise in revenues from integrated freight solutions that the Budget has spoken of.

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