Union Finance Minister Arun Jaitley said growth will recover in 2017.
"India stands out as a bright spot in the world economic landscape," he said.
Here are the highlights of the Union budget 2017.
Highlights of Union Budget 2017
FDIs increase 36%; forex reserves reach $361bn
India's current account deficit has declined from 1% of GDP last year to 0.3% of GDP in first half (H1) of 2016-17.
There's been a 36% increase in FDI from H1 2015-16 to H1 2016-17 even as global FDI inflows declined 5%.
India's foreign exchange reserves reached $361bn (January 20, 2017).
The IMF believes India will be one of the world's fastest growing economies.
Demonetization helping banks reduce loan interest rates
Jaitley said the negative effects of demonetization on the economy will be temporary.
He said there is evidence that the banking system's surplus liquidity is helping lower lending rates and increasing credit access.
"After demonetization, from November 8 to December 30, deposits between Rs. 2 lakh and Rs. 80 lakh was made in 1.09 crore bank accounts," he added.
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Jaitley said Budget will focus on 10 major themes
Jaitley highlighted 10 major themes for this year's Budget.
These are : 1) Farmers; 2) Rural population; 3) Youth; 4) Poor and underprivileged health care; 5) Infrastructure; 6) Financial sector for stronger institutions; 7) Speedy accountability; 8) Public services; 9) Prudent fiscal management; and 10) Tax administration for the honest.
No more service charges for online rail tickets
Service charges would be withdrawn on railway e-tickets.
All rail coaches will include bio-toilets.
As many as 3,500 railway lines will be commissioned.
A rail safety fund having a corpus of Rs.100,000 crore is to be created over five years.
There will be no unmanned crossings by 2018.
A new metro policy will be announced aimed at creating new jobs for youth.
100% rural electrification in 2018, housing plan gets boost
The government is on its way to achieving 100 per cent rural electrification by March 2018.
Rs.1.9 lakh crore has been allocated to the rural, agriculture and allied sectors.
Allocation for the PM's rural housing plan has been increased from Rs. 15,000 crores in 2016-17 to 2017-18.
1 crore houses for the homeless and those living in kutcha houses are being targeted by 2019.
MNREGA to get record allocation
Jaitley announced that allocation under MGNREGA has been increased from Rs.38,500 crore last year to Rs.48,000 crore.
This is the highest-ever allocation for the scheme.
The move is aimed at easing post-demonetization distress, especially to the rural sector.
Jaitley said participation of women in MGNREGA increased up to 55%.
Income Tax rate slashed by 5%
"The present burden of taxation is on salaried employees. Therefore, post-demonetisation this class expects a reduction their burden of taxation," said Jaitley.
He proposed reducing rate of taxation for individuals having income tax between Rs. 2.5 lakh to Rs.5 lakh from 10% to 5%.
One page tax filing form to be introduced for taxable income under Rs.5 lakh.
Farmers to get more insurance and APMC markets
Agricultural credit targets in 2017-18 have been fixed at a record Rs.10 lakh crores.
Coverage under Fasal Bima Yojana against natural calamities has been increased from 30% of cropped area last year to 50% in 2018-19.
The allocation to the Long Term Irrigation Fund set up in NABARD has been doubled to Rs. 40,000 crore.
Number of APMCs will be increased to 585.
Medicines to be made cheaper, elimination of diseases targeted
Rs.6,000 will be transferred in the accounts of pregnant women who undergo institutional delivery and vaccinate their children.
A proposal to amend the the Drugs and Cosmetics Rules to ensure availability of drugs at reasonable prices and promote use of generic medicines.
A new action plan to eliminate Kala-Azar and Filariasis by 2017, Leprosy by 2018, Measles by 2020 and Tuberculosis by 2025.
Political party funding
Govt. clamps down on cash donations to political parties
Jaitley said there is a need to make political funding in India more transparent. He said parties can receive donations in cheque and through digital means.
He said political parties and charities can now receive cash donations up to Rs. 2,000 from any one source.
Cash transactions over Rs. 3 lakh have also been banned.
Taxation of start-ups eased
Jaitley announced that start-ups will have to pay taxes on profits for three out of seven years as opposed to three out of five years previously.
Small companies having an annual turnover of Rs. 50 crore will have to pay an income tax of 25%, a 5% reduction to strengthen the MSME sector.
Carry-forward of Minimum Alternate Tax will be allowed for 15 years.
Affordable housing to be made more accessible
Proposal for affordable housing to get infrastructure status, allowing such projects to avail associated benefits.
National Housing Bank to refinance individual housing loans worth Rs.20,000 crore in 2017-18.
The scheme for profit-linked income tax deduction will consider carpet area, not built-up area, of 30 and 60 Sq.mtr.
Focus on online learning, skill development
A new system measuring annual learning outcomes in schools to be introduced.
An IT-based SWAYAM platform will be launched to provide 350 online courses for students taught virtually by the best faculty.
A new programme called SANKALP to provide market-relevant skill development will be launched at a cost of Rs.2,2000 crore.
100 India International Skill Centres will be created for youth seeking jobs abroad.
Govt. abolishes FIPB, may further liberalize FDI policy
The government will be phasing out the Foreign Investment Promotion Board (FIPB) this year to ease the FDI regime. As a result, foreign companies aiming to invest in India won't have to wait for FIPB approval. Jaitley said the FDI policy may be further liberalized.