Budget 2018: Will Narendra Modi government’s last full Union Budget 2018 on February 1 give common man, salaried individuals and taxpayers reason to cheer? Will income tax slabs be revised for 2018-2019? Will Finance Minister Arun Jaitley provide substantial tax relief to corporates? Conventional wisdom suggests that any government in its last full budget is likely to take a populist course. However, when it comes to Budget expectations from the Modi government – it’s always best to prepare for the unknown! That’s the biggest takeaway that emerges from a pre-Budget 2018 survey of 21 economists, experts and fund managers conducted by FinancialExpress.com. Even as top industry voices and sector and personal tax experts pitch for relief to businesses and taxpayers, the findings of the FE Online survey indicate that on February 1, the Budget presented by FM Arun Jaitley will be far from populist!
Union Budget 2018 comes at a time when the economy is still recovering from the after effects of demonetisation and the implementation of the biggest indirect tax reform, GST. It is only in the last quarter that GDP growth has recovered to levels of 6.3% after a slide for 5 quarters. However, skeptics feel that one quarter of uptick in economic growth does not guarantee a sustainable recovery. At a time when private sector investment is not picking up, all eyes are on the government to step up public expenditure to stimulate growth. However, given the fact that GST collections have not stabilised as yet, Modi government’s revenue avenues are strained and hence it’s a tight walk for FM Arun Jaitley on the fiscal front. It’s a Catch-22 situation! Here is what FinancialExpress.com’s Pre-Budget survey participants have to say.
Budget 2018 to be reformist or populist?
The will to introduce unconventional reforms like demonetisation has experts believing that Modi government will strike a middle ground between populism and hard-core reforms in its Budget 2018. Says Dhirendra Kumar, CEO of Value Research, “I expect an impactful Budget which is reforms oriented”. “Agriculture and infrastructure will be the two biggest focus areas as they also indirectly help create jobs,” he tells FE Online while participating in the pre-Budget 2018 survey. Vikas Vasal, National Leader – Tax at Grant Thornton sees the case for a balanced “pragmatic” Budget 2018. “It should be a pragmatic budget, and should not put undue pressure on fiscal deficit, though some maneuvering is fine. Focus should be on reforms and development, and boost business sentiment,” Vasal says while answering a question on whether the Budget will be populist.
Budget 2018: What common man can expect
For the common man, Union Budget 2018, will see some relief on the income tax front, suggests the Financial Express Digital Survey – but not to a great extent. Rusmik Oza of Kotak Securities does not see tax slabs being revised. He believes that since GST collections are slower than anticipated the government is finding it difficult to manage the fiscal deficit. “In this background it makes sense to increase the limit of 80C, which also provides relief to the middle class taxpayers,” he said. Sahil Kapoor, Chief Market Strategist believes that a minor revision for income tax slabs looks possible given the fact that income tax collections have been growing. Bidisha Ganguly, Chief Economist at CII also sees direct tax reform as the next big area of reform. “This should be explored in Budget 2018,” she tells FE Online. Corporates, on the other hand, may not be as lucky with most experts surveyed expecting that tax rates will not be revised substantially downwards. For most, the expectation from Budget 2018 is focus on agricultural distress, doubling farmers’ income and creation of jobs.
Watch video: Budget 2018: 10 expectations of the common man
Recently, PM Modi had said that common man does not want freebies – an indication that Budget 2018 will not be populist. At the World Economic Forum 2018 in Davos, PM Modi is reported to have joked with CEOs: Let’s see if you like me after the Budget! However, as the Budget session of Parliament begins, PM has also said that his government’s Union Budget will “add new vigour to India’s development and will fulfill aspirations of people.” As Jaideep Arora, CEO at Sharekhan points out, “Given the recent experience of bold reforms, the government has clearly shown its ability to take tough decisions.” Whether Modi government’s last full Budget 2018 will walk the middle path or be out-of-the-box – we can only keep guessing till FM Jaitley rises to present his Union Budget speech on February 1.
FE Online’s pre-Budget 2018 survey of 21 leading experts, economists and fund managers captured a gamut of macroeconomic areas – from fiscal deficit target, disinvestment and corporate tax rates to income tax slabs, top focus areas and out-of-the-box ideas for FM Arun Jaitley. Track this space to what FM Jaitley’s briefcase is likely to hold for you on February 1.