Let’s first begin with the upcoming budget. With few takers for the exemption-free personal income tax regime, Union Budget 2023-24 is likely to review the tax structure and could announce a few sweeteners as well, as the government tries to incentivise more people to opt for it. Under the additional personal income tax regime announced in Union Budget 2020-21, individual taxpayers who forgo most deductions and exemptions can pay taxes at comparatively lower rates. However, with no exemption for long-term investments, social security and medical insurance, the option hasn’t got any traction among taxpayers, including those in low-income brackets. According to sources, the government is likely to continue with both personal income tax regimes: the older one, which offers tax exemptions and deductions with relatively higher tax slabs, and the “concessional” regime.
Meanwhile, The government this week hiked the windfall tax on locally produced crude oil and on export of diesel and aviation turbine fuel. In the latest fortnightly review, the windfall tax on domestically produced crude oil was cut to Rs 1,900 per tonne from Rs 2,100 per tonne. This was the second lowest level since the tax was introduced in July 2022. The windfall tax on domestically produced crude oil was at its lowest level at Rs 1,700 per tonne in the second fortnight of December 2022. The windfall tax on export of ATF has been lowered to Rs 3.5 per litre from Rs 4.5 per litre that was prevailing in the last fortnight. The government has also cut the tax on export of diesel to Rs 5 per litre (inclusive of cess) from Rs 6.5 per litre previously. The notification by the Central Board of Indirect Taxes and Customs said that the new rates came into effect from January 17th.
Moving on, India Inc’s revenue is expected to rise about 14 per cent on-year in the fiscal third quarter ended December 2022 to Rs 10.9 lakh crore, following a steady rise in volume sales and price hikes. Revenue of sectors like automobile, IT services and construction-linked companies would likely show on-year growth, according to a report by CRISIL. Revenue for airline services may ascend as much as 41 per cent on-year; while the automobiles sector would drive past 22 per cent on higher domestic volume and realisations for vehicle makers, the report said. IT services revenue is expected to grow 13 per cent on-year; and construction-linked companies will grow courtesy ‘healthy rise in capex allocations by the government for infrastructure build-outs, healthy growth in orderbook and improved execution’. Sehul Bhatt, Associate Director-Research, CRISIL Market Intelligence and Analytics, said, quote, “Of the 20 sectors expected to outpace revenue growth, 10 should see a margin contraction and five marginal improvement. Companies are still not able to fully pass on higher commodity prices.”
In some more industry news, Tech layoffs continued into the new year, with at least 101 companies laying off 25,436 employees in the first few weeks of January, according to layoff.fyi, a site that tracks job cuts. Indian startups figure prominently among the firms which are laying off employees. Going by data shared by the platform, more than 1,600 tech employees are being let go per day on average in India and globally this year. Around 1,024 tech companies globally, including both big tech firms and startups, laid off 154,336 employees in 2022, making it the worst year in a decade for tech roles. Last year’s layoff wave exceeded all previous records, with retail, consumer, transportation, and finance-related tech companies firing most of the affected employees. ShareChat and Dunzo laid off 250 and 100 employees, respectively, this week, at a time when consumer internet companies are struggling with a funding slowdown and the ongoing economic downturn.
Speaking of economy, the impact of an incipient recession in the west on India’s foreign trade has become unmistakable. Merchandise exports shrank 12.2% in December 2022 from a year before to $34.5 billion, the second contraction in three months, owing to a slowdown in demand from key markets in the wake of aggressive rate hikes by major central banks and an unfavourable base. Goods exports had contracted 16.65% on year in October, while a flat growth was reported in November. Imports, too, dropped in December, albeit at a slower pace of 3.5%, to $58.2 billion, reflecting the impact of subdued domestic goods consumption in recent months. Plus, easing global commodity prices have impacted both exports and imports in value terms. Higher imports led to a rise in trade deficit to almost $23.8 billion in December from $22.6 billion in the previous month, although it’s still way below July’s record level of $30 billion.