Expectations from Budget 2016

India: Budget 2016

It is that time of the year again when the country gears up for a brand new budget and is glued to their television sets to analyze the impact of the Union budget on their respective homes, businesses, industries, sectors and the country as a whole.

Every year in the month of February, the Budget for the next financial year is presented by the Finance Minister, highlighting the plans of revenues and expenditures that the country is prepared to earn and incur respectively for the next year.

Stock Market Outlook

First of all, the third quarter earnings results are also expected in the next week. If we take a looking at some of the available data, inflation has been down along with commodities, like energy stocks and non-precious metals dropping in December. Parallel to this, there is a rise in food inflation. On the other hand, the growth in Nominal GDP is low and the rupee is under pressure.

And with the country witnessing the impact from the devastation caused by the Chennai floods, the recovery in the earnings growth looks a tough task. Owing to such circumstances in the nation, the Budget session seems to be the next big event for the investors which can lead to the much required acceleration in the markets. A notable feature of the two previous budgets was that there were no big announcements and the analysts are expecting the same trend to continue along with bringing an uptrend in the market movement.

Oil Prices

The value of the crude oil is likely to be pegged at $50 a barrel in the Budget 2016-17 in comparison to $70 a barrel in the Budget 2015-16.

Goods and Services Tax (GST)

A national Value Added Tax is likely to be implemented across the nation from 2016, as a part of a major indirect taxation reform in India, where taxable goods will not be distinguished from one another and will be taxed at a single rate.

However, in the pre-budget recommendations, the healthcare sector has demanded that it remains exempted from this tax so as to achieve a greater healthcare coverage. On the other hand, the Internet and mobile content service providers have also sought exemption to start-ups from service tax for the first three years.

Focus on Industries

According to the initial pre-Budget discussions, it has surfaced that the focus of the upcoming budget will be Agriculture, Infrastructure and Banking Sector. These sectors have been selected to cater more towards the rural sector of the country to strive for an overall growth of the country.

Even though the government is confronting a fiscal situation, Rs. 5300 crores have been allocated to support watershed development activities, micro-irrigation activities, and the Pradhan Mantri Krishi Sinchai Yojana. The efforts are likely to be stepped up even more. All of this since the rural economy is a major driver of the overall Indian economy and have taken a hit because of the last two seasons of patchy monsoons. Arun Jaitley, the Finance Minister of India, has already indicated that the government backing is likely to be increased in the farm sector technology. The revival of the rural sector is a top priority of the NDA government indeed.

Next big focus is the Infrastructure sector. In 2015-16, this sector saw an investment of Rs. 70000 crores from the Centre and state-run undertakings. Roads & Highways have demonstrated to be success areas and thus, there is a possibility of witnessing emphasis on public-private partnership (PPP) projects.

Another area of concern for the government is the Banking sector. Several measures, including granting in-principle licenses for opening Small Banks and Payment Banks to 10 and 11 entities respectively and pumping Rs 70000 crores for the recapitalization of state-run banks, have taken place. Since Banking is one of the major drivers of the growth of an economy, the Government is more likely to keep it in focus.

Road Ahead

Along with keeping their focus on such crucial sectors, the Finance minister’s team is also focusing on the government’s target of meeting the fiscal deficit of 3.9% of GDP for the current fiscal year.

Overall, it is expected that this year too, the Budget will make it that the government’s intent is to increase rural growth, financial inclusion, encourage more businesses to come up and also increase the ease of doing business across country.

A successful Budget is the one which can benefit an economy that too in a way such that all citizens are equally benefited. Such a Budget is also supposed to helping in greater job creation for the country. We should also keep in mind the fact that India still largely remains an agrarian economy and therefore a greater focus on the rural sector is definitely the need of the hour.

 

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