The budget presented
was trying to balance several interests. There was no big ticket reform agenda
in the budget. Budget was presented in an Economic Scenario,
where, there is a dampening Global Economic growth as well as the deceleration in India. There were many challenges to be
addressed by the FM. Poor Consumer
demand, lower profit for the corporates , low investments in the economy. and
lower tax collection by the government were to be tackled. The
budget addressed the expectations of the various segments of the Economy.
There are programmes for Farmers, Women, Children , SMEs. There is a focus on
reviving the Economic Growth with three Major themes; Aspirational India, Economic Development and
Caring Society.
The reduction in personal tax was across many of the income
categories and most of the tax payers will be benefitted by the reduction in
tax. They have also simplified the tax filing process and introduced a tax
payer friendly settlement of pending cases across all the courts . The reduction of taxes will benefit the tax
payers and put more money in the hands of the individuals resulting in higher
savings and higher consumption. This will boost the consumer demand for many of
the product categories, which is the major issue today.
Abolition of Dividend Distribution tax and increasing the
limit of investment by FPI’s in government securities / bonds, will go a long way in attracting more capital
investment from abroad as they could not get set off for the tax paid in the
home country. The decision to go for IPO by LIC, will also attract the foreign
investors including Sovereign Wealth funds, Pension funds and long term funds
from other parts of the world. This will meet the part of the funds required
for investment in Infrastructure.
There is a pressure on government to raise resources to spend
on Capex. All the net borrowings by the government are proposed to be spent on
Capex, which will add to GDP growth .The income from tax source is inadequate and filling this gap,
government has prepared a plan to raise lot of revenue from Dividends, Asset
Monetisation and Privatisation.
Large proposed investment in infrastructure ( which is part
of the Infrastructure pipe line announced by the Government )will create more
jobs as well as increase demand for many other industries .
Increasing the Deposit Insurance from Rs.1 Lakh to Rs.5 Lakh
will increase the confidence of investors in Bank Deposits and the banks will
be able to attract more deposits from the investors. Further, the government is
planning to consolidate few more banks , creating mega banks, which will increase
the capacity to fund large projects.
The focus on Agriculture, Irrigation and Rural development
will increase the income of farmers and those are living in rural areas. This
will help boost the demand in the Rural area, which contributes to more than
50% of demand for many of the consumer products in India.
With a view to develop a healthy society and individuals, the
programme on Wellness, water and Sanitation was given the required focus. This
will improve the parameters like Child mortality, human capital development and
healthy / robust work force.
In the Economic Survey,
there is a scheme of Assemble in
India , under the Umbrella of Make in India programme. There is also an
intended strategy to be present in
Global Value Chain in many of the industries. The focus on Skills and
Education , will go a big way in developing globally competitive industries in
India.
The concessional income tax scheme extended to Manufacturing
companies, were also being extended to power generation companies. This will
help to address the issues in the power sector and reduce the cost of producing
power. To give a boost to SMEs , the method of treating NPAs by SMEs were
relaxed.
The areas ,where the government could consider modifying the
budget provisions include, the new provisions relating to NRIs, their
investments, taxing their income and removal of Dividend of tax. Investors were also expecting exemption from
Capital gain tax from Stock markets for two years. To Stimulate the consumer
demand, the scope for reducing the KYC requirements for purchase of Homes,
Automobiles and Insurance policies could be considered.
The government has formulated many schemes and to realise the
budgeted goals it is very important the implementation mechanism should be made
more effective. There should be a continuous monitoring of the implementation
of schemes and a special organisation
structure has to be created for continuous
monitoring , effective feed back and
corrective mechanism.
