Union Budget 2017: Can Arun Jaitley balance populism and math? Here are top 5 things to expect
As finance minister Arun Jaitley breaks a 92-year old tradition and presents a combined Union and Rail Budget, expectations are running high to boost the economy that has slowed down due to demonetization. Jaitley will also have take into account global trade tensions, protectionism and rising crude prices.union budget Updated: Feb 01, 2017 10:34 IST
As finance minister Arun Jaitley breaks a 92-year old tradition and presents a combined Union and Rail Budget, expectations are running high to boost the economy that has slowed down due to demonetization. Jaitley will also have take into account global trade tensions, protectionism and rising crude prices.
The note ban dealt a blow to the economy, particularly to those sectors like agriculture and retail that are largely dependent on cash transactions. While the Economic Survey paints India as a ‘sweet spot’ among other countries, the government will have to boost growth in capital formation to retain its sweetness. That may be a tall order.
The government’s quest to usher in ease of doing business and repeated nudges to India Inc, private investment are yet to bear fruit.
The government has to ensure higher allocation to ministries handling infrastructure, such as defence, roads and highways, power to an effort to push public spending but a stiff fiscal deficit target has left it with little elbow room.
According to an internal study by the country’s largest lender, State Bank of India, the most disturbing sign in the economy has been the sharp decline in the growth of gross fixed capital formation — a proxy for investment activity — to (–)3.1% in the first quarter (April-June) of 2016-17 from a peak of 9.7% in the second quarter (July-September) of the previous fiscal.
“This trend needs to be reversed, and we need to ensure that the ensuing growth is likely to be more investment-driven rather than consumption driven,” the report had said.
It is a critical year for the BJP; after all 8 states go to polls before Jaitley presents his next budget. So he has to balance his budget maths with the political compulsions of populism.
Here are the top five expectations from Budget 2017:
Income tax sops:
After the pain of demonetisation, the Indian middle class is hoping for personal tax bonanza with an increase in exemption limits for income tax and lower tax slabs.
Boost to startups:
India’s sunshine sector is looking forward to the budget for a booster dose. On the wishlist are tax holidays and easier regulations on employee stock options.
As Prime Minister Narendra Modi persuades India to opt for a cashless and less-cash economy, people are looking for incentives for digital modes of payment. While consumers want rebates on use of digital payments, mobile wallet companies want lowering of transaction costs.
Housing-for-all vision likely to get a boost
Modi’s stated vision of housing for all is likely to get a push in the budget as the government looks to tap the real estate sector to boost a flagging economy.
Among measures under consideration is an interest subvention scheme whereby home loans could come at rates as cheap as 3-4% for salaried people with annual income less than Rs 10 lakh, three sources privy to the thinking within the government said independently. The cap on loans eligible for this could be in the range of Rs 25-30 lakh.
No populism, but no hike in passenger fare likely either
Jaitley is likely to announce the creation of a Rs 1 lakh crore fund corpus on infrastructure creation, including technology upgrades to ensure railway passenger safety, an ambitious scheme on steel imports to fast-forward track renewal plans, a speed upgrade plan for mail and express trains and the setting of timelines on executing the Mumbai-Ahmedabad bullet train project.
A “flexi-fare” scheme on passenger tickets is also likely, although the finance minister is expected to stay away from the tough decision of a direct hike in passenger and freight tariffs. Concrete proposals on the setting up of the Rail Development Regulator (RDA) are also likely.