Indian Finance Minister Arun Jaitley announced the country’s budget for fiscal 2017-18 in Parliament today, announcing a policy pivot toward boosting the country’s huge rural economy, which supports over 80 percent of the population, many of them poor and underprivileged.
The government also kept up the momentum of its push for a greater cashless economy by imposing a penalty on cash transactions over ₹3 lakh ($4,450).
The Finance Minister also said, however, that the country had to focus its export infrastructure in a competitive world, and announced a new scheme, the Trade Infrastructure for Export Scheme (TIES) towards building the country’s export competency.
Among the proposed measures is a zero tax on those earning less than ₹2.5 lakh ($3,700) and a 5 percent income tax for those earning between ₹2.5- and ₹5 lakh ($3,700-$7,415). The government also reduced the income tax for companies with turnovers under ₹50 crore ($7.4 million) to 25 percent.
The rural economy is a significant consumer of gem and jewellery products and both the All Indian Gems & Jewellery Trade Federation (GJF) the apex body of the domestic jewellery industry, and the Gem & Jewellery Export Promotion Council (GJEPC) said there was a great deal to cheer about in the new fiscal proposals.
GJF Chairman Nitin Khandelwal felt the budget would have a significant impact on GDP growth. He also felt that the government’s continuing efforts in this regard would increase transactions on digital platforms. But he cautioned, “The cash transaction limit of ₹3 lakh may affect consumers who still believe in cash.” He added that gold jewellery transactions, which tended to be of high value and with a majority rural base, would run into difficulties.
GJEPC Chairman Praveenshankar Pandya also said he thought the measures would ultimately lead to increased consumption in rural India. He also thought the export-oriented proposals were positive and said the gem and jewellery export production industry awaited details. “We require investment in infrastructure like Jewellery Parks all over India to enhance and transform India’s exports of gems & jewellery because of the uncertainty over oil prices and the information technology sector,” he said.
The government did raise the price point beyond which the listing of a customer’s income tax Permanent Account Number (PAN) is mandatory, from the current ₹2 lakh ($3,000) to ₹3 lakh. Most industry stakeholders said it wouldn’t make a big difference — the industry has been asking for ₹5 lakh ($7,410) cut-off limit.
Khandelwal said he hoped the government would increase the PAN card filing cut-off limit. He also hoped there would be a significant reduction in the import duty on gold.
The government wants to create an eco-system to make India a global hub for electronics manufacturing, but Pandya said this needed to be done for the gem and jewellery sector as well. “The government has to encourage international trading, and make India a global trading hub for diamonds and precious stones to give a boost to local manufacturing,” he said.
While the government has proposed special schemes for the leather, footwear & textiles sector, Pandya wanted the government to launch similar schemes to increase employment in both the domestic and export production segments of the gem and jewellery industry. Pandya also wanted more encouragement for new gem and jewellery entrepreneurs under the Start Up India initiative.