Amidst the slowdown in economy and falling GDP numbers, Budget 2020 presents a unique opportunity for the Modi government to kick-start demand and bring the economy back on track.
Budget 2020 Expectations: Finance Minister Nirmala Sitharaman will most likely present the Budget 2020 - 21 on 1st February 2020. One may recall that Modi government has put an end to the years-long tradition of the budget being presented in late February. Pre-budgetary exercise has already been kick-started from October 14th onwards as per a Budget Circular from the Department of Economic Affairs of the Ministry of Finance regarding the process of budgeting. In a first the Finance Ministry has also asked for suggestions for changes in tax rates for individual people and companies as well as indirect taxes like excise and customs duties from representatives and stakeholders from various sectors. One can only assume the hectic lobbying and brainstorming which would also have begun in the corridors of the power.
Some major big-ticket reforms, expectations and announcement from the budget 2020-21 are mentioned as below:
Cut in Personal Income Tax Rates
- It is believed that the middle class taxpayers form the core constituency of the Modi government. Thus this would not come as a surprise to many especially now when it is believed that the middle class is getting disillusioned and facing the brunt of economic slowdown and associated job losses. If sources are to be believed Finance Minister Nirmala Sitharaman may announce a lowering of the tax rate, most probably this will happen through a change in the tax slab. The FM has herself hinted about the same and if this happens it would be a welcome step and good news for low and middle income group and salaried people. Experts believe this would also help the FM put extra cash in the hands of the people so that demand for goods and services could be revived in markets.
Restarting Public and Private Investment and Growth
- There are high expectations from this Budget 2020 as far as restarting public and private investment and bringing the India growth story back on track is concerned. Modi government’s vision of making India a 5 trillion dollar economy by 2024 cannot be fulfilled with the current slagging growth numbers. To boost these growth numbers the government requires a major thrust in both public and private spending and investments. This has to be done along with keeping fiscal deficit numbers and revenue collection numbers in check. Although there have been some positives such as increased FDI numbers and India’s continuous climb in business competitive index but still, much is still desired and major reforms and work has to be undertaken. Aggressive disinvestment targets can be amongst other steps that the government is expected to undertake to improve market sentiments and increase public and private investments. Restart lending by banks and NBFCs so that growth in demand can happen is another core expectation not only of businesses but also of general consumer, taxpayer and the youth of the country.
Boosting Revenue Collection Numbers
- Falling GDP numbers also meant falling revenue collection and income for the government. Here the Modi government will have to walk a tight rope wherein they will have to give sops, tax breaks and incentives to various sectors and industries but yet will somehow find a way to boost its own tax collection and revenue numbers. Expanding tax base and thus increasing tax collection of both direct and indirect taxes will be one of the major areas where FM is going to concentrate is the view of experts. Almost all sectors are facing challenging times due to local as well as global issues. In such a scenario to boost revenue collection and cut expenditure will be a major challenge for the FM. A fine balance will have to be maintained so as to provide stimulus to various sectors, initiate reforms and also provide funds for socialist initiatives and schemes to provide relief to marginalised people of the country.
Impetus for slagging sectors
- Experts believe that the government will be providing the much needed support and assistance to the ailing sectors of the economy such as the Automobile, Banks, Real Estate, Telecom and Aviation sector and industry in the budget 2020. Softening economic growth and product demand is one of the major concerns on FM’s hands which need to be addressed in the upcoming budget. Thus experts are of the view that the Modi government should make some special provisions in the budget to boost various slagging sectors so that the primary sector and supporting industries can also gain momentum. Although the wish list of all the sectors may not be fulfilled but many remain hopeful and optimistic. The Union budget for the financial year 2020-21 will be presented at the time when the figures for the third quarter will be finalized and all experts are pessimistic about these numbers. In such a situation the budget 2020 - 21 can help the government boost numbers and demand sector-wise. The Budget 2020-21 can be considered as a step towards the Modi government's goal of five trillion dollar economy.
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