The Budget Gravy Train of 2016

A budget that was met with tons of cynicism resulted in a plunge in stock prices of some companies & the shedding of close to 200 points in the Sensex on the 29^th of Feb soon after the presentation by Mr. Arun Jaitley, Minister of Finance.  A day after however, the Sensex surged ahead as a result of confidence shown by business houses in the pro farmer budget. The flop show curtailed primarily by our Minister of State for Finance, Jayant Sinha, who called the budget a “Vikas ka Budget”.

In a nutshell, it’s a budget that angers the salaried class, pacifies the startups, cajoles the farmer & nurtures the poor. So here’s presenting a quick run through on what’s in this budget for citizens of the Republic of India:

For the Farmers:

The Finance Minister has rolled out several sops for the farm sector with a focus on doubling farmers’ income in 5 years. An ambitious plan by all means, which clearly asks the nation to bring BJP back in power in the general elections of 2019. And with the upcoming state elections in UP & West Bengal which are typically agriculture driven, the Govt. aims to come to power there. In fact our service tax has risen to 15% (wef June 1), up by 0.5% (a new Krishi Kalyan Cess), clearly pointing to the importance of generating funds for the farming community. A dedicated long term Irrigation Fund with an initial corpus of Rs. 20,000 crore in NABARD has been created. In totality, the target for Agricultural credit in 2016-17 is 9 lakh crore.

Sops for the poor:

Jayant Sinha said that “Garibon ki Unnati”, or upliftment of the poor, would be government’s foremost priority. A unified social security programme which would be linked to Aadhar will identify & target the poor to provide them with food, shelter, sufficient income support, health cover, life insurance, pension & access to various credit facilities.  The Govt. has allocated Rs. 38,500 crore for the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) this year. In addition, there will be a massive nationwide roll-out of ATMs & micro-ATMs in Post offices to ensure credit availability at all accessible points in the rural areas.

For the startups:

Not a very exciting sector, in terms of budgetary provisions this year. Rs. 500 crore has been allocated for Dalit & women entrepreneurs. There will be 100% profit deductions in 3 out of first 5 years for companies set up between April 1 2016 & March 2019.

For the salaried class:

This class is often the most stretched & penalized every year, ironically for paying their taxes! They would hereafter have to pay more for fine dining, movies, a visit to the gym or beauty salon, telecom services, electricity & mobile bills, amongst many other services which have been adversely affected by the hike in service tax. To top it all, their Provident Fund savings are also going to be taxed. It would be on the amount of the interest earned on the PF withdrawn if it’s greater than 60% of the total amount held.

The Digital twist:

Some positives, some negatives; multiple opinions are being posted on this year’s budget.  The budget, I must concede has one big positive, and that’s the huge Digital India flavor. It’s extremely tech-heavy other than being farmer-heavy. The finance minister has proposed establishing a land information management system, a financial data management center, an online agricultural marketing platform, a digital food grain procurement system, a website connecting dairy animal breeders & farmers, automation in 3 lakh fair price shops and a data-mining platform to nab tax evaders.

Well the train has moved from the Fiscal platform, let’s see where its stops, where it rolls back, where it derails & where it catches speed. Keep watching this space for more inputs & for any modifications that may happen as time goes by.

- Ms. Monica Mor

  Sr. Faculty, INLEAD

Bitcoins – are we ready for digital money?

The digital wave has hit the humankind like never before. Everything from shopping to booking our tickets to ordering food has all gone the digital way. We have actually become so dependent on technology that what was made as a way to help us, has now become a way of life for most of us. So, it comes as no surprise that man in the name of development has also given birth to a special kind of digital currency called Bitcoin. Don’t know what it is? Here, read the article and find all the answers you have been looking for.

What is Bitcoin?  

Bitcoin is a form of digital currency, created and held electronically. It’s unit for representation could be BTC, XBT or ^.Small amounts of bitcoins used as alternative units are called millibitcoin (mBTC), microbitcoin (µBTC) and Satoshi. The Bitcoin protocol was formulated as a payment system by Satoshi Nakamoto, supposedly a Japanese, in 2008 and the open source code for the same was shared online in 2009. There is a mystery behind the creator’s identity, to the extent that it may not have been a Japanese and that it’s a group of creators, and not just one.

How do they work?

Bitcoin uses peer to peer technology to operate with no central bank or authority. Managing transactions and issuing Bitcoins are collectively done by the network. To use a Bitcoin, one needs to install a Bitcoin wallet in his computer / mobile phone. Bitcoin wallets keep a secret piece of data called “private key” or “seed”, which is used to sign transactions and serves as a proof of the authenticity of transactions.

“Block chain” is a shared public ledger on which the entire Bitcoin network relies, and all confirmed transactions are included in the Block chain. The transactions are confirmed using Bitcoins via a process called “mining”. Mining enforces a chronological order in Block chain, protects neutrality of the network and prevents users from rolling back their spends and misusing or reusing the Bitcoins.

The rise of Bitcoins 

Over time, Bitcoin as a form of payment for products and services has grown, and merchants are incentivized to accept it as the fees are lower than the 2-3% levied by credit card processors.

The problem

The European Banking Authority  and  other sources have warned that bitcoin users are not protected by refunds or chargebacks (returning of funds to consumer by the charging bank for settlement of debts). In retail transactions, however, this cryptocurrency does not hold much momentum. The use of Bitcoins by criminals has attracted the attention of many regulators, legislative bodies, law enforcement and  media. In 2012, a study stated that 4.5% to 9% of all transactions in Bitcoin were within Deep Web (a world wide web that exists on ‘dark net’, which overlays the public internet) also called Silk Road, where one can access sites on child pornography, murder-for-hire and  weapons purchase. Then, there have been many instances of Bitcoin Ponzi (fraud) schemes as malwares also started stealingusers’ Bitcoins.

Coming closer to India, The Reserve Bank of India has often issued warnings against usage of Bitcoins as it may leave users exposed to financial, legal & security related risks. Despite these warnings, Bitcoin has been gaining currency in India and quite a few trading platforms have sprung up catering to Indians wanting to purchase Bitcoins for Rupees.

The Big Question

But the question still hangs in the air: Are we ready for a digital currency? Maybe, not right now. However, going forward we may be more open to using digital currencies or cryptocurrencies, if there are enough protective firewalls in place and, when we become increasingly environment conscious and work towards printing less currency notes.

What’s your take?

-Monica Mor

 Senior Faculty, INLEAD 

Images Courtesy- Google Images