Union Finance Minister Arun Jaitley will present his fourth budget in Parliament today. The significance of the budget lies in the fact that it will take place after Prime Minister Narendra Modi’s much-debated and surprise demonetisation move. There will be many firsts. This is the first time that Railway budget will be presented with the general one. Also, the budget will be the first since the Modi government’s decision to disband the Planning Commission. The 12th Five Year Plan period will be over in 2017 and the budget will focus on revenue and capital expenditure rather than putting thrust on conventional plan and non-plan categories. It is likely, that FM Jaitley will boost spending and ease back on cutting the deficit as he seeks to lift growth.
The shock demonetisation will shave off a good 0.5 percentage point from GDP growth this fiscal, pulling it down to 6.5 per cent, Economic Survey said yesterday while predicting “return to normal” 6.75-7.5 per cent in the next financial year and calling for bold tax cuts. The pre-Budget pointer had called for cut not just in individual income tax rates and a timetable for reducing the corporate taxes but also for widening the net to progressively encompass “all high incomes”. Though the Survey did not indicate what it meant by all high incomes, the reference may be to agriculture income which is currently out of the tax net.
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Following is the list of key expectations
1. Income tax: Finance Minister Arun Jaitley is expected to reduce tax rates in Budget 2017 to ease the pain of demonetisation that the common man had to go through. FM Jaitley is also likely to hike the income tax exemption limit from the current Rs 2.5 lakh to Rs 3 lakh at the least. Some schools of thought even expect that the exemption limit will be hiked to as much as Rs 5 lakh. Besides this the income tax slabs may be revised in a way that the peak tax rate slab of 30% may kick in after Rs 15 lakh instead of the current Rs 10 lakh. Sops for housing, some increase in medical reimbursement limits is also expected.
2. GST & indirect taxes : Modi government has succeeded in navigating rough political waters in getting GST to this stage. While the rates & mechanics of the implementation will be decided by the GST council, FM Jaitley is expected to lay out a roadmap for implementation. Also, analysts expect some changes in service tax rates and excise to align them with rates proposed slabs under GST. many expect some common services to get more expensive post budget 2017.
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3. GAAR: Post demonetisation, the government is expected to continue its war on black money and tax avoidance. General anti-avoidance rule (GAAR), which was very contentious when it first rolled out and has been delayed ever since is now finally expected to come in force despite persisting reservations of some players. Corporates, FIIs, and individuals will watch out for GAAR and its interplay with other tax avoidance initiatives. These initiatives also have to harmonise with tax treaties India has with key partners.
4. Railway Budget: This is the first time that the Railway Budget will be presented as a part of the main Union Budget of the government. The Railway Budget may focus on a host of issues, the most important of which would be railway safety. FM Jaitley is likely to allocate a decent chunk of the Rail Budget to safety. This is in light of the recent railway accidents. Apart from this, it is anybody’s guess on what FM Jaitley will announce. Some of the expectations that are doing the rounds are; hike in railway fares and greater involvement of private players.
5. Digital transactions push: One of the goals of demonetisation, apart from the aim of curbing black money, was to push India towards a ‘less cash’ economy. The country has seen a massive surge in digital transactions post the November 8 demonetisation drive. The Narendra Modi government has also launched its own updated UPI app – BHIM – to get more people to go the cashless way. With millions of downloads, the government is claiming a massive success in spreading awareness of cashless transactions. In line with that, FM Arun Jaitley may announce more incentives to get people hooked on to this seamless way of conducting transactions.
6. Make in India: The Budget 2017 would be an attempt by the Modi-government to soften the blow of demonetisation, making it populist. One of the major points of focus in the budget 207 would be on the pet projects of the Prime Minister, such as “Make in India” and “Digital India” among other sectors such as education, health and housing. “Make in India” has been one of Prime Minister Narendra Modi’s ambitious goals to attract foreign investments and take the nation forward to being a hub for manufacturers. Several foreign visits by the Prime Minister since 2014 have been mostly focussed on advertising India as a more-than-suitable destination for setting up industries. The Central government has been of the belief that for India to prosper and attain a GDP of around 8%, there has to be a major growth in manufacturing.
7. Social Sector: Finance Minister Arun Jaitley could announce a host of reform measures in housing, electrification, healthcare, education, farmers’ welfare, welfare of the specially-abled and rural development. Through the government’s ‘Stand-up India’ initiative, FM Jaitley could empower many more Scheduled Castes, Scheduled Tribes and women entrepreneurs. The National Scheduled Castes/Scheduled Tribes Hub which was launched earlier to promote entrepreneurship could be allocated more funds apart from the initial Rs 490 crore already given. FM Jaitley may also announce the setting up of more higher technical institutes to open up more avenues for students of economically weaker sections of the society. To create more jobs in the apparel and made-ups sector, Jaitley could further allocate funds in addition to Rs 6000 crore package announced earlier.
8. Infrastructure: Expectations are that the budget will give a massive impetus to the infrastructure sector in terms of extra budgetary allocation as the current government looks to boost economic growth amid demonetisation at home followed by a global slowdown. Given the plethora of approvals required for kick-starting an infrastructure project in any of its subsectors, a single window clearance is something which would propel the sector in the desired direction and reinstate the confidence of investors in this crucial sector. The Government should lay down detailed process and timelines including online clearances for new infrastructure projects.
(With agency inputs)