India has released its latest budget to great fanfare, presenting reforms that investors hope will finally deliver sustained and rapid economic growth.
The budget earned plaudits from analysts, many of whom described it as a solid — if not revolutionary — plan.
But some said weeks of anticipation had given way to a feeling that the government of Prime Minister Narendra Modi had missed an opportunity on Saturday to introduce “big bang” free-market reforms.
On a day when pragmatism ruled, here are six of the biggest ideas:
1) Social Security for all Indians
While details are thin, India’s government is moving to plug some of the holes in its social safety net. The budget calls for India to build a social security system that will benefit everyone, especially the “poor and under privileged.”
“This is possibly the first budget that — albeit in a small way — tries to address the problems of the vast section of India’s population not having any social security network,” wrote Kunal Kumar Kundu of Societe Generale. “The move to provide them with some form of life, health and accident insurance is indeed laudable,” he said.
2) Lower taxes on business
Businesses operating in India currently pay some of the highest rates in the world.
The government is hoping to change that, cutting India’s corporate tax rate to 25% from 30%. The reduction, to take place over four years, should make India more competitive against international rivals.
3) Higher taxes on the rich
To make up some of the revenue shortfall, Prime Minister Modi hopes to slap a new tax on the super rich. Those making more than 10 million rupees ($160,000) will be on the hook for a 2% surcharge.
4) Real penalties for tax cheats
India has a tough time getting people to pay taxes (which makes it difficult to raise revenue). Only around 35 million Indians pay income taxes, out of a working age population of nearly 800 million; China can count on about 300 million taxpayers.
The government is taking aim at tax cheats, with new penalties for people caught moving money offshore or through the black market.
Jail terms will reach up to 10 years in cases of foreign tax evasion, and monetary penalties will be stiff. Failure to file a return could land violators in the slammer for up to seven years.
5) More spending on infrastructure
The government has promised to boost infrastructure spending by 700 billion rupees ($11.3 billion) next year. There is no shortage of work to be done on this front: Railways need to be modernized, and other transportation systems overhauled.
Societe Generale’s Kundu described the extra spending as “immensely desirable.”
6) Goods and Services Tax
The Modi government promised that a widely anticipated national Goods and Services Tax (GST) would be implemented by April 1, 2016.
India’s states have a myriad of different taxes, and trading between them is a nightmare. The GST should help smooth trade and standardize costs.
What’s next?
Budget euphoria is likely to quickly give way to hard political reality.
Modi, for example, will need the cooperation of parliament to make reforms a reality. He has a majority in the lower house of parliament, but it will take immense political will to push serious reforms through the opposition-controlled upper house.
In the meantime, the prime minister will continue to benefit from tailwinds that include lower energy prices, and inflation numbers that are well in hand.
— CNN’s Ravi Agrawal contributed reporting.