Budget 2016: Investors to common man, Jaitley needs to do balancing act
The budget will also be keenly watched for on the government’s stand on welfare handouts, subsidy reforms and measures to counter the rising perception that the current regime is “anti-farmer”.union budget Updated: Feb 28, 2016 23:08 IST
Finance minister Arun Jaitley, set to present his second full budget on Monday, has the difficult job of making India regain its spot as an investors’ darling, easing rules of doing business and signalling long-term economic reforms without hurting the country’s vast consuming class.
Besides, he has to grapple with a key question: how to create jobs for teeming millions that are joining the workforce and heal an unravelling rural economy.
Around noon on Monday, you will probably get to know whether Jaitley has put more in your hands to spend.
There are heightened expectations that he would raise the income tax exemption limit from the current level of Rs 2.5 lakh to about 3 lakh.
The budget will also be keenly watched for on the government’s stand on welfare handouts, subsidy reforms and measures to counter the rising perception that the current regime is “anti-farmer”.
A spirited opposition has closed ranks to pin the government down on “anti-farmer” policies and ignoring peasants hit by two years of back-to-back droughts and mounting debt.
Jaitley’s budget will also be keenly followed on the government’s vision about welfare handouts and social sector development to make growth more inclusive.
The budget will be presented two days after the Economic Survey said that India is poised to grow at grow at 7 to 7.75% in 2016-17, signs that it was looking to temper expectations hemmed in by uncertain conditions in the world economy.
He also has to balance the budget books, given that he has set aside a large sum of funds for a higher wage and pension bill.
The finance minister is expected set aside an additional Rs 1.10 lakh crore for higher salaries on lines with the recommendations of the 7th pay commission and the one-rank, one pension system for the defence personnel.
He has the option of earning extra revenues by raising service taxes and excise duties on consumer goods such as televisions and cars. The risk: it will fan inflation by immediately making most services such as a visit to the gym or a beauty parlour costlier.
In 2013, the then finance minister P Chidambaram had introduced a so-called “super-rich” tax-- a 10% surcharge for those with a taxable income of above Rs 1 crore a year. Arun Jaitley raised it to 12% last year. There is a possibility that Jaitley might raise it even further.
Investors are keenly watching for the FM’s cues on the controversial “retrospective tax” that allowed placing a tax demand on even older corporate deals such as Vodafone’s acquisition of Hutch’s mobile assets in India. This had hurt India’s image as an investment destination. Investors want a roll back of the law.
Two signature initiatives-- “Make in India” and Start Up India—are widely expected to get a big push in the budget.