On the macro economic front, the total Fiscal Deficit was targeted at 3.2% of GDP for FY 2017-18 and 3% for the next year, while revenue deficit is targeted at 1.9% for the current year. The debt to GDP ratio will also be maintained at 60% by the year 2023. This indicates the government is committed to gradual fiscal consolidation over a period.
Reduction of tax rates for MSMEs and personal taxes (first slab)will increase the disposable income in the economy albeit at a small rate. This will however bring demand back in the economy. The government will be incurring a revenue loss of INR 15,500 crores by reducing the tax rate in the INR 2.5 lakhs to INR 5 lakhs category. This will be offset by imposition of 10% surcharge on individuals earning above INR 50 lakhs and upto INR 1 crore, to an extent of INR 2,700 crores.This move is seen largely as a fiscal stimulus (net of INR 12,800 crores)much needed to increase the demand in the economy.
The budget remained committed to improving governance, with capping donations received by Political Parties in cash and making it mandatory to file income tax returns.
We consider granting infrastructure status to affordable housing will provide significant benefits to the real estate sector. This means that the sector will get more institutional funding; stabilizing it in the long term.
Overall we think this budget has made a very good effort in further reigning in black money and increasing transparency in the economy. Though it did lack some major tax reforms that the market was expecting, it is pro-reform and in the right direction towards general improvement of the country.
Click the image to download the key tax proposals of the Budget 2017.