India has been facing intense situation due to various reasons.
After long public and political debates, the government could successfully complete one task of implementing CAA despite protests.
Now, the second one i.e., the herculean task of economic recovery!
The Modi administration has been brainstorming on this issue amid the ‘serious concerns’ raised by the international community, premier institutions and multilateral bodies.
While the process is underway, the ‘Budget Day’ is fast approaching!
From industry bodies, top elite groups and business leaders to small-scale industries and general public, all eyes are now on the ‘Union Budget 2020-21’.
Top in the ‘Wish-list’ from the ‘India Union Budget 2020-21
1) From the ‘Common Man’
A series of surveys conducted in local zones show the common man expecting a rise in LTA and basic tax exemption limit. 4 in 10 people weren’t supportive for subsidies on replacing old cars.
Around 70% of survey respondents want the government to raise the basic exemption from 2.5 L/A to 5 L/A.
With regard to standard deduction in salaries, 50% felt that should be raised to Rs 75,000, while 20% people felt that process should be scrapped altogether, and a few others recommended a receipt-based deduction.
Environment, infrastructure and Agriculture, Women & Child Safety were the top sectors that respondents (30%) felt would require maximum allocations in the new budget.
With regard to consumer spending, the respondents recommended deductions, tax cuts and incentives, among other ways.
With regard to LTA benefits, the respondents recommend multiple travel trips should be allowed for submitting travel receipts in place of single travel trip receipt currently, for tax exemptions.
2) ‘Economy, The Utmost Priority’
An open letter to the Prime Minister from Wallstreet urged Modi to take economy as the topmost priority than anything else.
Emphasizing on the acute credit crunch and need for growth revival, the message asked PM to make a collaborative effort involving Finance Ministry, RBI and banking regulators.
It cited an example of what US did after the financial crisis by way of forced capitalization, banks stress testing, more liquidity provisions and direct lending, among others.
It said ‘investment revival’ should be the policy priority for creating employment and boost productivity.
Decentralization of decision-making is another area that the letter emphasized on, urging the government to involve all the relevant key stakeholders and give them necessary freedom to express judgment for effective results.
It also cautioned the government about dealing with fiscal deficit, which is to make economic policy and improve performance. It said unwanted focus on fiscal consolidation can be counterproductive. For this to be supportive, deficit spending has to be well planned for present and future with clear short-term and long-term economic activity.
Rural economy is one area that’s awaiting the governmental support in the current context, it added.
3) Incentivizing Power Distribution
Leading credit rating agency ICRA says the government should allocate high budgets for strengthening power distribution infrastructure, thus helping state-owned utilities.
“In this context, ICRA expects announcement of policy measures to incentivise the power distribution segment including higher budgetary allocation for strengthening the distribution infrastructure to enable an improvement in the operating efficiencies of discoms,” ICRA said in a statement.
4) Simplifying Tax Laws, Dispute Resolution
Tax experts urge the government to address tax disputes that have been pending since long.
Citing the Finance Standing Committee, they say there are many significant cases, involving an amount of Rs 10 lakh crore, struck in direct tax litigations across various appellate courts and forums. According to them, it would take at least 10-15 years to resolve all tax disputes in India.
In this regard, they urge the Finance Minister to come up the dispute resolution schemes like ‘Sabka-Vikas’ to address issues.
Strengthening Public Sector Banks (PSBs)
Public Sector Banks (PSBs) is another area that is facing challenges with regard of recapitalization due to little scope for capital infusion. Key provisions for recovering amounts by way of the National Company Law Tribunal (NCLT) is the need of the hour, which is expected in the new budget. Ensuring liquidity, normalizing credit cycles and effective dealing with rate interest cuts continue to be keep expectations in this area.
Disinvestment in government-run organizations or PSUs will be helpful in reviving economy, say the experts.
Executing Infrastructure Projects
While the government has, recently in December 2019, announced a Rs 102 lakh crore for various infrastructure projects, the details and execution plans are yet to be included in the Budget.
According to the experts, power, railways, urban development, education, health, rural electrification, affordable housing and real estate are likely to get major boost through the new investment.
Untimely monsoons have affected the rural India badly in 2019. As a result, low prices on agricultural output and liquidity crunch prevailed across the rural areas, impacting their overall income. In this context, Minimum Support Prices (MSPs) and subsidies would be the need of the hour for agriculture sector to boost the rural consumption.
Easing FDI Inflow
While the current state of Foreign Direct Investment (FDI) is on track, experts opine that tweaking policies a little, creating a more conducive business environment and achieving progress in the Ease of Doing Business Index would add to the FDI influx into the country.
In a pre-budget expression note, leading research agency ICRA said telecom industry is facing intense pressure. It said the industry is expecting reduced levies, clarity on subdued issues, resolution of tax issues and release of GST input credit dies to alleviate financial burden. The industry is currently facing intense pressure in terms of competition, pricing and continued capex, among others, and eventually landed in huge debts.
Stay tuned to more updates on the India Union Budget 2020-21!
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