Finance minister Arun Jaitley said the scheme to provide Rs 5 lakh annual health coverage to 100 million families is affordable and can be funded from the Budget. The government is hopeful of rolling out the programme fully this year. Jaitley had announced the plan in the February 1Budget.
He ruled out any cut in the tax liability for 7,000 companies with turnover in excess of Rs 250 crore and paying 30% tax, saying the Budget cannot afford it until exemptions are removed. He was replying to the debate on the Budget in the Rajya Sabha on Friday.
The finance minister held out hope for salaried sections that standard deduction will be raised in the coming years and said long-term capital gains tax had been imposed on shares and mutual funds to bring about parity as the exemption on this class of assets was being enjoyed by the wealthiest.
Wrapping up the debate in the Upper House, he said with the rollout of anti-evasion measures, goods and services tax (GST) revenue should pick up, indicating further rationalisation of the 28% slab. He said that oil prices were just within comfort range.
The government will use the A2+FL formula (actual cost plus imputed value of family labour) to determine the cost of production of crops to fix the minimum support price (MSP) for farmers. The Budget pegged this at 50% over the production cost.
Countering senior Congress leader and former finance minister P Chidambaram’s accusations over management of the economy, Jaitley said the Indian economy had moved from policy paralysis under the previous government to structural reforms and from being counted among the so-called fragile five to recognition as a bright spot in an uncertain world.
The completion of the debate in the Rajya Sabha marked the end of the first phase of the budget session. Jaitley said the exemption from long-term capital gains tax for shares and mutual funds was justified when investment in the stock market needed to be incentivised.
“Indian economy today is on a far sounder footing,” he said, adding that most of the benefit of Rs 3.67 lakh income exempt last year went to the wealthiest such as high net worth individuals, corporates and foreign financial institutions.
“The equity behind the policy of exempting the wealthiest from payment of tax was itself a question and therefore we have put a 10% long-term capital gains tax,” he said.
He also rejected criticism of the government’s decision to cut corporate tax rate to 25% for companies with turnover up to Rs 250 crore that it was too pro-business. This was a proposal included in the direct tax code put out by Chidambaram, he said.
Jaitley said the reduction will create more jobs. He said the 7,000 corporates for which the tax has not been cut still enjoy several exemptions and the average tax they pay is only 22-23%.
“If it is to be extended to all… burden on the tax itself will be Rs 40-50 thousand crore, which will be very high, which at the moment the budget can’t afford to absorb,” he said. “That can only be absorbed if it is accompanied by the waiver of all exemptions. They first go back to 30% net tax and then they are entitled to it.”
On the Rs 5 lakh health cover per family scheme announced in the budget, he said it was affordable. While some independent experts have said it could cost over Rs 1 lakh crore to cover 100 million families, the government’s own assessment is it will cost about Rs 10,000 crore.
Government think tank Niti Aayog estimates the premium per family at Rs 1,000-1,200, which translates into Rs 10,000-12,000 crore for the full rollout of the scheme to cover 100 million families.
Without mentioning Niti Aayog’s assessment, Jaitley said the scheme is “affordable and affordable within the budget.”
“We have tried to raise the level of ambition of the society and the budget. I am confident that the government will be successful in rolling out the scheme fully in the current year,” he said.
Jaitley said high oil prices were adverse for the country since it’s a net importer.
“There is an oil price which is rangebound, which gives us a comfort level.
Today we are almost on the outer periphery of that comfort position. If it breaches that, it creates an adversity for us,” he said.
Brent crude prices have slid to about $64 per barrel following the recent turmoil in the global financial markets, after having spiked earlier.
On the issue of sluggish private investment, Jaitley said there are early indications that it’s picking up and after the capital infusion of Rs 2.11 lakh crore into banks announced by the government this should rise further.
Jaitley cited numbers to point to the success of the black money campaign. “I had anticipated income tax collections will rise 14-15% this year. As on January 31, the growth over last year is 19.7%.”
Jaitley said the budget has taken care of senior citizens and the salaried class has also been offered Rs 8,000 crore relief through the standard deduction.
“I am sure bringing standard deduction back, in years to come this will be added upon because those in professions and businesses have the facility of taking various expenses to their accounts etc. The salaried class has no such opportunity and therefore there was a strong need to bring this back,” he said.
Jaitley admitted that there are problems with the minimum support price (MSP) system for farmers while explaining the budget decision to expand its scope and coverage.
“Even if MSP is fixed, it is not available in the market. This is a reality,” he said, explaining the formula proposed in the budget.
“Therefore, the proposal given in the budget aims at providing MSP to farmers. MSP is fixed by taking into consideration the input cost, labour cost. A2+FL and (the farmer) gets 50% more,” he said.
The formula is “A2+FL, that is the understanding I have from the agriculture ministry,” he said, while replying to a query by Congress leader Jairam Ramesh The bulk of Jaitley’s speech was devoted to a point-by-point rebuttal of issues raised by former finance minister Chidambaram.
Jaitley cited numbers to show how his government is doing better than the Congress-led administration’s last few years on growth, inflation, fiscal deficit, revenue deficit and current account deficit.
India had gone from being a basket case to the world’s brightest economy, Jaitley said. In the early years, the last government had benefited because there was a boom in the global economy, he said.