Aam aadmi, industry and the nation as a whole did not expect much from Finance Minister Arun Jaitley when he presented the first non-UPA budget in 10 years last year. The Narendra Modi-led National Democratic Alliance (NDA) Government had barely 45 days to prepare the Union Budget 2014-15. So, the first Budget of the new Government simply carried forward the reforms initiated by the previous Government albeit a roadmap for the future. By and large, it manifested continuation rather than any significant change or departure from previous policy. The honeymoon period is over now and the Government would try to come out with big bang reforms, smartly mixing them with populist measures. It is widely speculated that now expectations are quite high and the Modi Government’s first full-fledged Budget announcements would contain not only broader contours of transformation but ground-level big reforms.
Promises to keep
While presenting Budget 2014-15, Jaitley had said that his first Budget was only the beginning of a journey towards a sustained growth of 7-8 per cent or above within the next three-four years along with macro-economic stabilisation that includes lower levels of inflation, lesser fiscal deficit and a manageable current account deficit. Recently, Jaitley promised to leave more money in the hands of the consumer to fuel demand and growth. He also made it clear that the NDA Government was against raising revenue by imposing higher taxes. In other words, he assured a fair and transparent tax regime for all. Last year, the Government raised income tax exemption limit from Rs 2 lakh to Rs 2.5 lakh and it would not be surprising if the middle class, the largest taxpayers in the country, gets further relief in one form or other.
Populism vs policies
Given the trends and Prime Minister Narendra Modi’s obsession with populist measures and focus on development agenda, it is expected that the Union Budget 2015 is poised to be a mixture of populist and reformist measures to match the popular slogan given by the Prime Minister, ‘Sabka Saath, Sabka Vikas’. The Jan-Dhan Yojna is an ambitious scheme for financial inclusion and aims to improve the lives of the weaker sections. Digital India, Beti Bachao, Beti Padhao and Skill India etc. are other ambitious programmes and if the Government wants to see effective implementation of these programmes, the coming Budget would be very crucial in terms of allocations of funds for them.
Likewise, ‘Make in India’ campaign, which aims to make India a manufacturing hub thereby creating a win-win for both the industry and skilled workforce, would require clarity in terms of policy framework. Global investors and manufacturers want conducive business conditions with respect to regulations, tax regime and infrastructure. Hype around ‘Make in India’ has successfully been created and to take it forward in true sense, the Finance Minister is expected to announce some big ticket reforms with regard to the manufacturing sector. Clarity in FDI-FII policy across sectors, with better Centre-State coordination to stimulate investments and improve business confidence, is also required.
Big bang reforms through the Budget are expected to revive investment, economic growth and job creation, enabled by the next generation reforms to fast-track India’s economic resurgence.
Fair and transparent tax regime
Fiscal consolidation, disinvestment, expenditure management, upgradation of tax infrastructure are critical areas and need much attention in the Budget. Fair and transparent regime, for both the industry and aam aadmi, is required urgently. So, this time, it is expected that the Government would make amendments to tax laws. It is also expected that it would encourage deposits by reducing lock-in period of bank deposits eligible for tax rebate to 3 years from 5 years and enhance threshold for mandatory TDS on interest income to Rs 50,000 a year from Rs 10,000 currently. The Government should also make tax compliance easier by removing separate levies of surcharge, education cess, etc. It is also recommended that simplification of indirect taxation structure, especially excise and customs, would facilitate GST implementation. So, it would interesting to see whether the Government makes earnest efforts to move away from the aggressive revenue approach or not. It appears that to attract investments providing a genuine non-adversarial and conducive tax environment for industry would be a compulsion rather than choice.
Agriculture, education and health are the most critical areas and touch everyone. In healthcare, the Government spending is even lower than even Sri Lanka’s expenditure. The Government is coming out with a National Health Policy and it is expected that the demand of increasing current Government spending of 1.5 per cent of the GDP to 2.5 per cent would be met. If the Government increases the expenditure to 2.5 per cent, it will have huge impact and would make the policy effective. Likewise, higher allocations to education and agriculture would play important role in ‘ Sabka Vikas.’ The economy is turning the corner and green shoots of recovery are gradually becoming visible. Hence, this is an opportune time to take the reform agenda concerning priority sectors forward which would transform the economy.
Roadmap for the future
The Budget is not a balance sheet which details income and expenditure but it is supposed to provide a future roadmap and vision with regard to policies and programmes. Therefore, people would, from a much awaited majority Government, expect much more than they can get. However, things that are expected from the Finance Minister were a certain vision and a roadmap for India’s socio-economic progress for the next five years.
It would be interesting to watch how the Finance Minister is going to spell out his strategies for a higher (7-8 per cent) growth. Hopefully, now the Government would not delay in announcing its ground-level policies to transform India with the Mantra of ‘Sabka Saath, Sabka Vikas’ (inclusive growth with the support of all).
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