Indian budget focuses on digital economy and rural growth
The Indian government has announced that it will be banning cash transactions of greater than 300,000 Rupees (UK£3600 or US$4500), in a 2017-18 Budget which focuses on boosting the digital economy and rural growth.
The move fits into India’s demonetisation agenda, designed to move the country towards a cashless economy – a project championed by prime minister Narendra Modi. In the Budget, finance minister Arun Jaitley also set out other ‘Digital India’ initiatives including a new virtual payments system.
Aadhar Pay uses India’s system of Aadhar personal identification numbers, and permits anyone registered with the system to send money around the country. “This will be specifically beneficial for those who do not have debit cards, mobile wallets and mobile phones,” said Jaitley, adding that the government hopes to see 25bn digital transactions during the 2017-18 financial year.
Jaitley also urged banks to equip more shops and merchants with debit and credit card systems. “The digital payment infrastructure and grievance handling mechanisms shall be strengthened,” he promised.
Alongside these boosts for the cashless economy, the Budget also prioritises poverty alleviation and rural growth – promising to lift 10m households out of poverty over the next two years. A record 480bn (£5.8bn or $7.2bn) has been allocated under the rural employment scheme, known as the Mahatma Gandhi National Rural Development Guarantee Act. In total, the government aims to spend 1.87 trillion rupees (£22.4 or $28bn) on various rural development schemes in the coming year.
Another ingredient of the federal Budget was aimed at the salaried public. Jaitley sharply reduced the tax rate for individuals who earn between Rs 250,000 (£3000 or $3700) and Rs 500,000 (£6,000 or $7400) from 10% to 5%. This is expected to benefit as many as 20m taxpayers and will also boost India’s tax to GDP ratio, which is currently one of the worst in the world.
Above that, another 4 trillion rupees (£$48bn or $60bn) have also been earmarked for infrastructure projects – a steep 10% rise on the previous year.
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