Indian Finance Minister Arun Jaitley unveiled a budget for the poor on Monday, announcing new rural aid schemes and skimping on a bank bailout, in a strategy shift that seeks to boost his ruling party in coming state elections.

Jaitley reiterated a forecast that India would grow by 7.6 percent in the fiscal year that is drawing to a close. He said the government wanted to spread the benefits of growth more widely among India’s 1.3 billion people, but that he would stick to the government’s existing fiscal deficit target for the coming year.

b’Source: Reuters’

Here are the highlights of Jaitley’s budget for the fiscal year that begins on April 1:

Fiscal Deficit

  • Fiscal deficit seen at 3.9 percent of GDP in 2015/16
  • Fiscal deficit seen at 3.5 percent of GDP in 2016/17
  • Plan expenditure seen at 5.5 trillion rupees in 2016/17
  • Proposes to set up panel to review fiscal responsibility management act

Rural Economy

  • Rural jobs programme allocated 385 billion rupees ($5.61 billion) in 2016/17
  • Farmer welfare budget to total 359.84 billion rupees
  • Rural road development to get 190 billion rupees
  • Target of agriculture credit at 9 trillion rupees
  • Interest subvention towards farm loans at 150 billion rupees

Policy Reforms

  • Bankruptcy code for financial firms to be introduced in parliament in 2016/17
  • RBI act is being amended for implementing monetary policy framework
  • To list general insurances companies on stock exchanges

Banking Reforms

  • Government to infuse 250 billion rupees capital into state-run banks in 2016/17; will find resources for additional capital for banks if required


  • Will not resort to retrospective taxation in future; one time tax dispute resolution proposed for retrospective taxation
  • To rationalise corporate tax for new manufacturing companies
  • To implement general anti avoidance tax rule from April 1, 2017
  • Security transaction tax on options raised to 0.05 percent
  • Proposes to levy infrastructure cess of 1-4 percent on certain models of cars
  • Raises factory gate tax on various tobacco products by 10-15 percent
  • Proposes limited compliance window on undeclared income of domestic tax payers
  • Proposes new dispute resolution scheme to resolve tax disputes
  • Proposes to abolish 13 different levies


  • Gross market borrowing seen at 6 trillion rupees for 2016/17


  • Allocates 2.21 trillion rupees for infrastructure development for 2016/17
  • Allocation for roads and highways development at 550 billion rupees
  • Capital expenditure on roads and rail development at 2.18 trillion rupees


  • 100 percent foreign direct investment to be allowed in food processing industry
  • Promises further reforms in foreign direct investment policy in insurance, pension, asset recast companies


  • To encourage central public enterprises to divest own assets for raising resources for new projects

Market reaction

  • India’s benchmark 10-year bond yield falls 5-6 bps as Jaitley sets 2016/17 fiscal deficit target at 3.5 percent of GDP
  • India’s state-owned banks shares pare gains after Jaitley announces lower-than-expected capital infusion; SBI down 0.5 percent
  • Indian rupee gains sharply to 68.61/dollar from around 68.70 levels on 2016/17 fiscal deficit target

($1 = 68.6700 Indian rupees)