Ideas have already started to brew amidst the discussion and debates so that economy can bloom to the fullest potential. Now is the time of the year when only one word looms in the mind of people: “Budget”. The Government is pulling up its socks so that it can present a budget for the financial year 2016-17 that would be a stepping stone in the development process for India. To develop, the Government’s focus is not just on transforming economies but also on transforming the lives of people.
The Finance Minister of India, Arun Jaitley in his second full-year budget is likely to focus on steps to accelerate economic growth that seems to have stagnated in 7-7.5 per cent range amid a global slowdown. The Finance Minister’s Budget team comprises Minister of State for Finance Jayant Sinha, Chief Economic Advisor Arvind Subramanian and NITI Aayog vice chairman Arvind Panagariya. The official team is led by Finance Secretary Ratan Watal, DEA Secretary Shaktikanta Das, Revenue Secretary Hasmukh Adhia and Disinvestment Secretary Neeraj Gupta.
With advent of set of reforms introduced in last budget like hike in service tax rate to 14 per cent, incentivised use of debit and credit cards and contribution towards Swachch Bharat and Clean Ganga projects, this year too all eyes will be glued to television sets on 29th February 2016 to know more about the Government’s credo for the year ahead. Whether it is the common man on street or the corporate head honcho, the expectations are high as to how the finance ministry will appease at least most of the people, some of the time. So, here we discuss a few parameters on which people expect that measures shall be taken to boost the economy and lift the overall business sentiment in the country. These parameters are as follows:
WIDENED TAX BASE:
The biggest question that needs to be addressed is why in a country of more than 125 crore people, just about 3.5 crore are in the trap of income tax? It has already been pointed out by Tax Administration Reform Commission (TARC) that only 3.3 per cent of the population pays tax in India which is very low as compared to 39 per cent in Singapore, 46 per cent in Singapore, 46 per cent in the US and 75 per cent in New Zealand. It has been felt that the number could be easily doubled to 7 per cent.
Some concrete measure would bring in more people under the tax net and help distribute the tax burden across individuals in the society. There are conjectures that the Government may announce increase in tax exemption limit on savings. Bankers have already sought significant hike in tax breaks to promote savings in their pre-budget suggestions to the finance ministry. In fact, the Reserve Bank of India (RBI) has also propelled the need to increase country’s savings.
BOOST TO TAKE HOME SALARIES
The Union Budget 2016-17 is likely to announce measures to put more money into the hands of employees with a monthly income up to a certain threshold, like Rs.10,000, for instance, by doing away with their mandatory 12 per cent contribution for Provident Fund (PF) savings. This will boost the take-home salary of such employees rather than force them to park so much of their monthly income into their EPF account for retirement.
EXTENUATE HRA EXEMPTION:
Currently the concept of metro cities involved in the calculation of House Rent Allowance (HRA) includes Delhi, Mumbai, Chennai and Kolkata. But in the contemporary time, rents have skyrocketed in cities like Gurgaon, Hyderabad, Bengaluru and Pune. These cities can also be brought under the purview of cities where in individuals can claim exemption instead of paying high rents.
NATIONAL PENSION SCHEME (NPS):
NPS is fabricated as an EXEMPT EXEMPT TAX (EET) which means that as such when investment is made deduction is allowed but when the corpus of returns is encashed tax has to be paid on it. Now, in order to encourage participation and make the scheme more attractive the scheme is expected to be made as EXEMPT EXEMPT EXEMPT (EEE) so that there are free tax withdrawals.
It is expected to focus on attracting investments for augmenting present and future facilities. Railways can be attributed to be only the greatest gift of the British rulers to India which has driven the economy since then and remains its backbone. Allocation for Kerala increased in last year’s budget and the trend is expected to continue this year as well.
REMOVAL OF SPECIAL EXCISE DUTY ON PETROL/DIESEL
While crude oil prices have declined by nearly 70 per cent from $100/bbl to $30/bbl levels, price of petrol has declined by only 25 per cent from Rs 80/litre to Rs 60/litre (Delhi). The reason is that the Government has been hiking the excise duty on petrol to make up for the less than expected collection in direct taxes. Currently, specific excise duty on petrol is Rs 21.5/litre. It was only Rs 9.5/litre in April 2014. If this additional Rs 12/litre is removed, petrol price in Delhi would be Rs 48/litre. Assuming 100 litres of consumption per household, this translates into savings of Rs 1,200 per month. Not many critics would argue. But in the aggregate this leaves Rs 1,20,000 more money in the hands of public which could then be saved or expended. This is roughly three per cent of India’s private consumption expenditure, one per cent of India’s GDP and can have a huge impact on growth.
SPECIAL ECONOMIC ZONE (SEZ) TAX BENEFITS IN BUDGET
The budget for 2016-17 is expected to contain measures to boost economy as well as exports. The Commerce Ministry has suggested the removal of Minimum Alternate Tax (MAT) on these zones in the budget 2016-17. The Export Promotion Council for Export Oriented Units (EOUs) and SEZs (EPCES) too anticipates that the government should not withdraw any tax incentives from SEZs as it might hit exports and job creation. During the April-September period of current fiscal year, exports from these zones stood at Rs. 2.21 lakh crore as against Rs. 4.63 lakh crore in 2014-15.
REDUCING LOGISTICS COST
The Government is expected to cut logistics cost and streamline the taxation structure, including the implementation of the crucial Goods & Services Tax (GST) in the upcoming budget, to give a much-needed boost to the shipping industry. The industry is hopeful to see a cut in the existing logistics costs in India, which constitutes about 13 per cent of GDP. This will render the necessary thrust to ease the cost of logistics and successfully increase Indian exports by providing a cutting edge to our exports in the global market. It will reduce the landed cost of imports thereby giving a further thrust to the economy.
FISCAL CONSOLIDATION ROADMAP
While the Finance Minister must pursue the path of fiscal prudence and maintain fiscal discipline, he also has to walk a tight-rope in order to rationalise subsidies without compromising on development spending. The fiscal deficit for the entire current fiscal year has been pegged at Rs 5.55 lakh crore (3.9 percent of GDP). Hopes are high that Mr. Jaitley is able to rationalise subsidies, reform the legal and taxation system without having to sacrifice anything at the altar of populism.
- Higher allocation to be made in the Budget for the implementation of recommendations made by the Pay Commission. The Governemnt has decided to make provision of Rs 1.10 lakh crore for the commission and One Rank One Pension (OROP) plan
- Framework for the roll out of GST can be expected by the government
- Exquisite focus to boost agriculture which has been the backbone for such a long time for India
- Innovative ways to create demand and jobs and improve trade
- Allocation of funds to prevent cyber-attacks like in Kerala and Orissa
- Encourage entrepreneurs through emphasis on STARTUP INDIA, STAND UP INDIA
- Tourism has been an immense contributor in growth. It is time to provide sufficient impetus to put India in the global tourist radar
While the situation of crisis hovers over major developed economies, there are high expectations from India to write a growth story that remains relatively unscathed in these times. People still awaits ‘Ache Din’ and hopes that the government will deliver this time so as to meet the expectations of people. An attitude of positive expectation is the mark of superior personality. Thus, the Budget 2016 is queued with expectations and hopes that government will unravel a concrete action plan to foster growth.
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