Just as Nirmala Sitharaman wrapped her maiden Budget in a four-fold red cloth instead of carrying it in the customary briefcase and furiously renounced what she believed was a "British hangover", an air of ebullience and ingenuity enveloped her as she stretched her speech for over two hours, without breaking once for water.
The two themes that stole the limelight were electric vehicles and affordable housing, thanks to the additional income-tax deduction of Rs 1.5 lakh each on the interest on loans taken to buy them.
On the flip side, she picked a global practice of taxing the super-rich and jacked up the peak effective tax rate to 39% to 42.7%, higher than the US, where the super-rich are taxed at a maximum of 40%. A pro-poor move, it needs to be seen how much revenue will come in through the new source of tax mop-up.
Targeting a seemingly-difficult fiscal deficit target of 3.3% of GDP, marginally down from 3.4% set in the Interim Budget in February, Sitharaman didn't look perturbed. She announced an aggressive disinvestment target of Rs 1.05 lakh crore as another revenue prop to meet her growth initiatives. Though there was no stimulus to pump up growth, the government said it would recapitalise the public sector banks by introducing another Rs 70,000 crore to stimulate growth.
"The Indian economy will grow to become a $3 trillion economy in the current year. It is now the sixth-largest in the world. Five years ago, it was in the 11th position. In Purchasing Power Parity terms, we are in fact, the third-largest economy already, next only to China and the USA," said the assertive finance minister, who wants to take India to a $5 trillion economy by 2025.
On the expenditure side, $11 billion was set aside for rural initiatives and nearly as much for a capital boost to banks. For an immediate mop-up of revenue, she hiked the price of petrol and diesel by Rs 2.
The Economic Survey, ahead of the Budget, had projected a growth target of 8% to achieve the goal of a $5 trillion economy by 2025, double its present size of $2.7 trillion.
She expanded the pension scheme and lowered corporate tax while laying out a plan to see that companies are made more publicly owned. Keeping the rural poor in mind, the Budget targeted building 19.5 million rural homes over the next two years, bringing 30 million small retailers under the pension scheme that provides 100 million informal sector workers with a pension of Rs 3,000 a month.
She also provided corporate tax relief to a wider network of companies. All companies with a turnover of Rs 400 crore will have to pay a corporate tax of 25%. Earlier, this relief was available only to companies with a turnover of Rs 250 crore.
The FM said the government will launch an inter-operable ATM-like 'One Nation One Card' for pan-India travel, new rental laws for affordable housing, interest subvention scheme for micro, small and medium-sized enterprises and women. To improve digital transactions, she has introduced a tax deduction at source (TDS) of 2% on all cash withdrawals of Rs 1 crore a year.
Start-ups registered with 'Startup India' will be exempt from angel tax, a long-pending demand of the sector. The government has now allowed investors to re-invest their capital gains (from sale of real estate) into start-ups and claim exemption of these amounts from tax; and their funds would not come under the scrutiny of the income-tax department.
