New Delhi: Finance Minister Arun Jaitley will be presenting his fourth Budget, the first after demonetisation, in Parliament at 1100 today, in a break from the past when the year annual financial statement of expenditures and revenues was tabled always towards the end of February.
Coming after the hard decision of invalidation of high value currency notes, which was 86 per cent of the total money in circulation, it is hoped that the Budget 2017-18 would look to blunt the blow of note ban with income tax exemptions and other sops for the common man.
This time, the colonial era practice of presenting a separate Railway Budget has been discarded and the budget for the largest department of the government has been merged in the general budget.
Meanwhile, the Economic Survey tabled yesterday has given some indications of the nature of Budget that could be expected.
The Finance Minister may give some relief to tax payer through adding a new slab in the Income Tax or by raising the limit for the tax. The same was expected last year too which was not fulfilled.
It is expected that Mr Jaitley may take some corrective measures to give a boost to the economy, hurt by the demonetisation. Apex Chambers and business fraternity is also looking for the same as they believe that the demonetisation had a short term negative impact, but it will help in long term if Government announces some bold steps to provide low rate of interest to the industry.
The Economic Survey too has clearly laid out the challenges and opportunities that India faces at the present juncture. Chambers have agreed with the need to overcome the three ‘meta challenges’ as identified in the survey namely inefficient redistribution, ambivalence about the private sector and property rights and the improving but still challenged state capacity.
In this scenario, a clear plan of action with sustained reforms in each of these areas by the government is a must to attain sustained high and inclusive growth.
The Economic Survey has predicted the growth rate of GDP for the current year at a lower level, but has predicted better scenario for the next year. It is still around 6.5 per cent to 7.5 per cent. It is said that the GDP growth rate would had been more if demonetisation had not happened. Government too is of the opinion that it should be around 8 to 8.5 per cent if a significant number of jobs has to be generated.
So, it is expected that Finance Minister may take some steps bold in nature to achieve the target especially in the field of job creation.
One of the steps in this direction may be of making provisions in Budget which softens the lending rates. It will provide low housing loan, personal loan, loans to industrial and manufacturing units. This will bring down the capital cost as well as the production cost. And these are the areas where the possibility of job creation is in large number.
The tax relief limit may be enhanced in the budget as various measures taken by the government in the last one year yielded in better tax collections allowing the exchequer to go for Income Tax relief.
The pension income for senior citizens over 65 years may be made completely tax free. This will not only help the elderly but will also reduce operational work for income tax authorities.
The budget may provide higher allocation for the Railways for safety. Apart from this, the Railway may get extra allocation for its major projects as announced by Prime Minister Narendra Modi in his earlier speeches. There may be allocation for high speed trains.
According to Rating Agency Crisil, the Budget could allocate funds to the tune of Rs 1.3-1.4 trillion to Railways for 2017-18, a move which could help in faster execution of projects in this space.
As per the Economic Survey, the Agriculture sector will grow at a satisfactory rate of 4.1 this year which is very good news for the government as it will help in containing the inflation as far as food items are concerned. This will allow the government some relief on fiscal deficit too.
And to take the agriculture to the next level, Finance Minister may announce extra relief measures and schemes for the farmer to help them getting more return on their investment. This is a commitment of Prime Minister Modi since the election campaigns of 2014 general election and farmers are still waiting it to happen.
Every government had a focus on creating better infrastructure in the country. This government too has a focus on it. Due to higher tax collections in the current financial year, the FM has a privilege to announce some more major infrastructural projects in different part of the country. This will help the economy along with creating job opportunities in the government sectors too.
Mr Jaitley may increase the spend towards social sectors including schemes like MGNREGA, Pradhan Mantri Gram Sadak Yojana (PMGSY), Sarva Shiksha Abhiyan, Midday Meal Scheme, National Health Mission, etc. in order to boost its ‘pro-poor ‘or ‘pro-farmer’ image and in the process provide a major thrust for rural demand revival.
In the new world order, there is change of guard in the US where a lot of Indians use to get jobs in IT sector and Indian earns huge remittances from this sector. Now, Donald Trump has become the President of the US and has shown all his commitments for the jobs to US people first. This may hurt Indian economy especially in the IT sector.
This concern has been raised by the Chief Economic Advisor Arvind Subramanian too in his briefing after the tabling of the Economic Survey. Finance Minister is also aware of it. So he may take note of it and could provide some steps to help the sector in case need arise.
Though, the fiscal deficit in terms of GDP is not very high, the Finance Minister still has his own limitations as he has to keep the revenue deficit and budget deficit under control. Again, he has to keep the external factors in his mind so that the export did not become too expensive and hurt the overall trade deficit. He has to keep the policies which favours FDI.
In the above scenario, it would be interesting what Mr Jaitley will do in his fourth Budget for the country.
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