Union Budget gives direction to as to which way Indian economy will drive in next fiscal year. Let’s analyze what are the expectations and challenges.
- The income tax exemption limit is currently INR 2.0 Lakhs per annum which can be increased to INR 3.0 Lakhs per annum. Though the move may reduce the funds in government coffer from income tax, but it will also increase the disposable income into the hands of the people which in turn will raise the spending power. In income through increase in demand may more than compensate the loss from increase in exemption limit.
- However, the increase in disposable income increases the money supply and demand which will push the inflationary forces. Increase in demand can be compensated by increase in supply. Growth in supply can be ensured by removing infrastructure bottlenecks. Production capacity can also be increased by facilitating appropriate infrastructure.
- A mechanism needs to be put in place where the government has adequate control on fuel prices and does not let them subject to the fluctuating prices of global crude oil prices.
- India Incorporation would like to see the large-scale tax reforms, which includes early introduction of goods and services tax (GST) regime. GST regime is likely to get priority in this year’s budget.
- The Confederation of Indian Industry (CII) wants the government to remove “retrospective” tax amendments that is discouraging foreign investors. The Federation of Indian Chambers of Commerce and Industry (FICCI) has urged the Government to focus on skill development. Moreover, ASSOCHAM is pitching for reducing the corporate tax rate from 30 to 25 per cent, doing away with surcharge and reduction of minimum alternate tax. In order to increase the investment and ensure the participation of private sector in infrastructure development, instilling the confidence in private sector is imminent and for that matter government may give in to the measures suggested by corporate India.
- The small scale industries had called for raising the excise exemption limit (at present, the limit is INR1.5 Crore). With escalating costs of raw material and high interest rates most of small-scale businesses are struggling to sustain. Their profit margins are severely hit and they need some form of support from the government to revive.
- For the last few years, expenditure on education is hovering around 3 percent of GDP. Right from the time of British India, there has been demand of 6 percent expenditure on education. Thus increase in fund for educational development is likely to be increased in the budget. To make domestic higher education more affordable, the government must take adequate steps to decrease education loan rates across the board.
- Health budget is also likely to get increased as government is poised to establish an AIIMS (All India Institute of Medical Science) like institution in almost every state capital. Government has already asked many states to identify land for the institute.
- During one of his election speeches, Prime Minister criticised government over the complacent approach of then government regarding border disputes. With an aggressive foreign police, we may expect government to increase the defence budget. PM also hinted on transforming India from an importer of defence equipments to the net exporter. So we may expect rise in expenditure on research and development activities.