#TGLife
Today is the day that decides whether dreams and aspirations of billions of Indians will live or die. While Indian budget has mostly been viewed with optimis so far, this year, union finance minister Nirmala Sitaraman faces a host of challenges as the country is battling a very real economic slowdown. Consumer confidence is at its lowest since 2014, while the unemployment rate has hit 6.1 percent, highest in the last 45 years. Similarly, economic growth too has dipped to around 4.5 percent.
The industry is clamouring for more government spending to boost pump up the economy. However, some reports suggest that India cannot just spend its way out of the trouble this time like it has done before. The country was facing a revenue shortfall of around Rs 2 lakh crore as of November, and had resorted to borrowing on the open market. Some of the common expectations from the upcoming budget include a cut in income tax slabs, abolition of dividend distribution tax on companies, and higher fund allocation to rural areas. Will the taxes be cut or will they increase? Will the government throw open its coffers for spending, or will it undertake measures to save money? These are the questions that have everyone curious and worried.
Whazt has been done so far
n Two-and-half-months after presenting her maiden Budget, that was hailed as ‘development-friendly’ and “future-oriented”, Sitharaman in September announced fiscal measures that will cost the government Rs 1.45 lakh crore in revenue annually and may potentially derail the country’s fiscal deficit road map.
n The government cut base corporate tax rate for existing companies to 22 per cent from current 30 per cent; and for new manufacturing firms, incorporated after October 1, 2019 nd starting operations before March 31, 2023, to 15 per cent from 25 per cent.
n Legislation brought to make layoffs easier so that private firms will undertake labor-intensive work has also been welcomed by some sections. This might help spur new jobs to some extent.
The government is expected to undertake huge expenditure programs to revive growth. To ensure better outcomes, expansionary policy needs to put more money in the hands of the people. While unemployment is rising, Modi’s promise of demographic dividend appears to be losing shine. It is not long before the population starts aging and dividend turns into a disaster. India’s government expenditure on education and health is lower than that of similar countries. Rise in education expenditure will also improve the government’s popularity in student class.
” Anish Dhopeshwarkar,
economics student, Ponda
The primary priority must be to uplift the buyer sentiment. While this can be done at multiple levels, increasing the current tax exemption limit on interest of Rs 1.5 lakh (Rs 3.5 lakh for affordable housing) to Rs 5-6.5 lakh (at least for FY21 and FY22) will lead to a confidence boost for buyers to expedite their decision. The Government must simultaneously provide adequate tax relief to those stuck with incomplete projects, yet paying pre-EMIs regularly without any tax relief.
Another area to boost buyer sentiment is via tax relief on house property income. Tax experts highlight that the standard deduction of 30 % has not been revised since early 2000. This must be evaluated, considering the current dull scenario and a higher inflation in house maintenance costs.
” Kamal Khetan, chairman and managing director, Sunteck Realty Limited
The only way to boost demand in current scenario is to increase government spending. However, there is a shortfall in revenue. In that light, the capital expenditure on big project might be stopped for some time. A few months ago, the government cut corporate tax rates, further worsening the revenue situation, and now the individual taxpayer is also expecting a cut in taxes. In such a situation, the government cannot afford to increase GST rates, and will have to find other ways of generating revenue. This means the prices of goods such as branded clothing, cars and commodities such as gold might increase.
” Manoj Kamat, economist, Margao
