This year’s budget is going to be a particularly interesting, not just because it is the last full budget of PM Modi’s tenure but also because it is the first budget after the big-bang GST reform rolled out. With dwindling macros and simultaneous pressure around political dominance, the government may face difficulties in pulling off a balancing act. However, having said that, we hope the government continues to be biased towards economic welfare and fiscal prudence. We expect a few measures that could help the government ensure Indian happiness along with trying to support economic growth at large.
An increase in tax-exempt limit; possibly even a tax-rate cut
We can expect the government to increase the tax exemption limits from current Rs 2.5 lakh to Rs 3 lakh. This will be a move which will be in line with the government’s objective to increase tax collection. Notably, last year the budget proposed to reduce the lowest tax slab from 10 per cent to 5 per cent.
A reduction in the highest tax slab from 30 per cent to 25 per cent to boost compliance is also on top of the expectation list.
Extending the 80C deductible threshold
Currently, an investor can claim deductions under section 80C to a limit of Rs 1.5 lakh. We can expect the government to act on the long-pending request to increase this limit to Rs 2 lakh. This will be to spur household investment levels.
Dedicated digital initiatives
The government has been pushing hard for driving digitalisation across the economy. We can expect the budget to introduce a scheme to incentivise digital initiatives and implement it across various public-sector operations. A key objective would be to tackle cyber-threats and data breach attempts in a much more efficient manner. The FinTech sector, which has started contributing significantly to the exchequer through taxation, may stand to benefit from the allocation.
Address the rural distress
Despite the last year witnessing record output and increased MSP, farmers continue to be under distress. The government may take improve allocation towards healthcare, NREGA and introduce better pricing mechanisms for agricultural output.
Job creation and impetus to the SME sector
Job creation has been a key point during all propagandas of the current government. However, job creation has been out of the government’s line of focus for quite some time now and the opposition has been using this against the current government across rallies. The budget is a bright opportunity for the government to justify its focus on job creation. The SME sector being the most potent sector for job creation, may land up on the government’s top list for allocations. The government can be expected to route investments through Mudra and CGS.
(The writer is the co-founder of Fisdom.com)