Prime Minister Narendra Modi's government is set to unveil its first full budget shortly, a day after announcing the time was ripe for long-awaited reforms to kickstart the economy. Ahead of the budget presentation, scheduled at 11am in the Lok Sabha, finance minister Arun Jaitley met President Pranab Mukherjee, who was himself a finance minister, and was also present at the customary meeting of the cabinet, presided over by Prime Minister Narendra Modi inside Parliament House.
The stock markets were all fired up, hoping for some positive outcomes from the budget to lift corporate fortunes, leading to the sensitive index (Sensex) of the Bombay Stock Exchange (BSE) jump some 225 points, or 0.75%.
Around noon, you will get to know if Jaitley has put more in your hands to spend. He is expected to raise the income tax exemption limit from Rs 2.5 lakh to about Rs 3 lakh.
The objective: put more money in people’s hands. The hope: they will spend more on goods and services. The desired result: rising sales will prompt companies to invest in creating capacities. And the spin-off: they will hire more, thus creating more jobs.
India’s stock markets opened on a bullish note ahead of the budget. The BSE 30-share Sensex opened more than 200 points while the NSE’s 50-share Nifty opened more than 50 points up.
Although in office for less than a year, time is ticking for the Modi government to fulfill its poll pledge. It needs to create jobs but has little elbow room in the treasury. It now has to share a larger slice of its tax revenues (42% from 32% earlier) with the states following the recommendations of the finance commission.
Jaitley also has to balance the budget books without knocking up prices. He can earn extra revenue by raising service taxes and excise duties on consumer goods such as televisions and cars. But this comes with a risk: this will fan inflation by making most services, such as a visit to the gym or a beauty parlour, costlier.
The budget will also be watched for the government’s stand on welfare handouts, subsidy reforms and measures to counter rising perception that the NDA regime is “anti-farmer”, given the changes it has proposed to make land acquisition easier for building roads and factories.
On Friday, the government forecast India's growth would exceed 8% in the next financial year, leaping from around 5% for the past two years and overtaking China to become the world's fastest-growing major economy.
Jaitley is expected to increase spending on the country's underfunded transport network and dilapidated power infrastructure as part of PM Modi's plans to entice foreign businesses to set up shop in India.
The country's new chief economic advisor Arvind Subramanian told parliament on Friday the economy remained fragile. "The balance of evidence shows that India is still a recovering economy, not a surging economy," he said.