Most of us are awaiting the verdict that is likely to come out in the first week of July. The presentation of Union Budget 2014-15 will be closely watched and analyzed by investors, businessmen, and economists alike. Before the finance minister Arun Jaitley unveils the budget, there are a few pressing concerns that he must address. He has to strike a balance between growth and moderating inflation. On a holistic note, India is anticipating a slew of measures that would kick-start the economy and take the growth trajectory higher around 7-8 per cent. It’s also incumbent upon the government to take measures to reverse the slowdown and create an environment, which is conducive to attract foreign direct investment (FDI).
Expectations of Aam Admi
There’s hardly any margin for error when it comes to dealing with a common man. New government should have this at the back of its mind while proposing new measures to meet aam admi’s expectations. According to reports, Finance Ministry has made up its mind to raise tax exemption limits to encourage people to spend more, which will naturally boost growth. In the upcoming budget, the exemption limit might be raised from the current Rs. 2 lakh. Similarly, people also expect that the limit for exemption for Medical reimbursement is increased from existing Rs. 15000.
The citizenry would also love to see government deduction levels for investments in insurance schemes being raised. That would certainly make savings look more attractive. It’s time that the finance ministry got the pulse of the people. It must take another important step towards encouraging savings and home buying – increase the current limits of deduction on the home loan amount.
Having said all this, the major relief that common man is eagerly waiting to get is in terms of inflation. It would be interesting to see how the new government manages to give hope on that front. As of now, there’s a conflict of interest between RBI and the government. While RBI has zeroed in on curtailing inflation by keeping interest rates high, the latter is more focused on pushing growth agenda. For this to happen, the interest rates must fall, which is again out of scope, according to RBI.
What India Inc. Expects?
When Jaitley will hold talks with apex industry bodies on Friday, he will certainly be able to gauge the sentiment of the business fraternity and their expectations. India Inc. is looking forward to get clear guidelines for the new Direct Taxes Code (DTC). While UPA government had the intention of implementing DTC, there isn’t enough clarity on whether the new government will go ahead with the same bill. Industry representatives would also love to see large-scale tax reforms, which includes early introduction of goods and services tax (GST) regime. According to government officials, GST is likely to get priority.
The Confederation of Indian Industry (CII) has already made its expectations clear. It earnestly wants the government to remove “retrospective” tax amendments that is discouraging foreign investors. The Federation of Indian Chambers of Commerce and Industry (FICCI) has urged the Government to focus on skill development and curbing inflation. On another note, ASSOCHAM is pitching for reducing the corporate tax rate from 30 to 25 per cent besides doing away with surcharge. It has also sought reduction of minimum alternate tax.
Measures Expected to Boost Domestic Industry
Excise relief can be one of the game changers for BJP if it is serious about winning the confidence of the business fraternity. The small scale industries had called for raising the excise exemption limit (at present, the limit is Rs 1.5 crore). With escalating costs of raw material and high interest rates most of small-scale businesses are struggling to sustain. Their profit margins are severely hit and they need some form of support from the government to revive. Even Jaitley had admitted the fact that there’s a need to boost the growth of indigenous industry so that they can be at par (if not better) with their counterparts in China and Bangladesh.
With Union Budget being the first major policy document from the government, a lot is at stake for Modi and his trusted cavalrymen. The government has affirmed time and again that it means business, but it’s no mean task.