Tomorrow (Feb 1) is union budget day. The union budget is most waited by all citizens as it affects every one. There are anxiety over news taxes and incentives. What goods will get cheaper and which are likely to be taxed, these are the concerns all of us share till tomorrow morning when budget is presented in parliament.
One thing looks certain. As Indian economy is passing through a critical phase since Demonetization in 2016, budget is expected to offer tax incentives and higher spending as to shore up demand. Weak demand has led to slowdown and affected GDP growth rate. If our growth rate falls short of 8 percent (projected growth rate in Economic Survey is 6.1%), Prime Minister Modi's dream of India becoming $5 trillion economy by 2025may get delayed to distant future.
Right now country needs higher spending in rural areas. And as such government is expected to widen its budget deficit target for the year from 3.3 percent to 3.8 or even 4 per cent of gross domestic product. Govt tax revenue is weak and it hasn't received as much money it expected from assets sales. So Finance Minister will rely on heavy borrowing including sale of bonds to allocate enough funds for rural development as to create more jobs. More jobs will mean more money in people's pockets and with consumption of goods and services going going up, this will increase demand and ultimate growth.
The tax concessions already extended for companies after slowdown to boost investments could result in government missing the current year's Rs 16.5-lakh crore tax revenue target as per report. A shortfall of Rs 2.1 lakh crore is estimated in income from taxes.
Since inflation is big concern as higher prices may dent savings, budget is expected to be neutral for inflation. There could be tax incentives to support businesses and consumers.
And tax rebates on home purchases will have a multiplier effect for both employment as well as consumption.Also expect some cuts in income taxes, long-term capital gain. Tax relief for individuals as proposed by the Direct Taxes Code, could result in a net gain for the government.
Over all the budget is expected to be spending elastic to shore up demand and create employment.
(Chander Sharma)
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