Plan and Policy

Plan & Policy

Expect populist measures

Budget has lost relevance post GST: However 2019 important due to Election Year: Post GST relevance of budget has gone down considerably, however given that this interim budget is the last budget before 2019 elections and tight rope walk for the NDA, expect a slew of populist measures. India's fiscal condition is far from being comfortable with fiscal deficit likely to exceed target of 3.3% of GDP, huge shortfall of Rs1900bn in GST collections and likely shortfall of Rs 200bn in divestment target.

Focus on consumption and investment boost

The economy has made significant progress in combating inflation in recent years. India has emerged as the fastest growing major economy in the world. Over the last four years, inflation has averaged just over 4 per cent. In the last calendar year GDP grew at an average of 7.2 per cent. Mergers and Acquisitions (M&A) activity in the country has reached $82.1 billion in 2018, whereas Index of Industrial Production (IIP) rose 5.6 per cent year-on-year in April-October 2018.

Budget could impact monetary policy

We expect the central government to meet the FY19 fiscal target but slip on the FY20 one. A new package for rural India and continued support for small businesses are likely to be the key themes.

Long-term vision with electoral bias

Union Budget 2019-20 will have a human face, be progressive, farsighted, have a long term vision keeping electoral bias, will provision adequately to handle farm distress for the deprived and the most disadvantaged, provide way for millions in India to take pride in their knowledge and seek livelihoods with their skills and potential, further secure and provide for healthcare, education, basic income framework, housing and infrastructure developments for under-privileged in all sectors including agriculture, industry and services, ignoring the vote on account convention when elections are d

North Block finds ways to meet deficit target

Interim dividend from RBI, monetization of SUUTI holdings, unused compensation cess on GST and national small saving fund may come handy for finance minister Piyush Goel to meet the fiscal deficit target of 3.3 percent for current fiscal.

Sticking to deficit targets may still be possible notwithstanding the less-than-expected increase in direct tax revenues, shortfall in mop-up through disinvestments and about Rs 7 000 crore shortfall in monthly GST collections.

Kapoors agree for now, but may soon disagree

Pushed to the wall by the Reserve Bank of India, the two warring co-promoter groups of Yes Bank--Rana Kapoor and Madhu Kapur—finally stitched together a compromise deal on Tuesday, both deciding to appoint a representative director each on the private bank's board. However, it remains to be seen how the two groups choose the third nominee director, as that could trigger yet another unsavoury public spat.

“The two promoter groups may choose the third nominee director jointly or may decide not to appoint anyone at all,” said a source close to the promoters.

Taxation, technology and trust are key

Over 80 million of India’s skilled workforce today is employed under the MSME (micro, small, and medium enterprises) segment, be it agriculture or Information Technology Enabled Services (ITES). Just as Google is the search engine of India, similarly, MSMEs are the country’s job engine. While it’s the general election season, it’s okay for the government to seem populist, but they need to keep their focus on being realistic, as the budget has to be #IndiaFirst.

Support for renewables

Given the criticality of power sector for the economy and the fact that there has been a significant focus on reliable power supply and 100 per cent rural electrification throughout the country, the central government may further augment the budgetary allocations towards its flagship schemes - Deendayal Upadhayaya Gram Jyoti Yojna (DUGJY) and Integrated Power Development Scheme (IPDS).

Challenges in foreign tax credit

In India, taxation of individuals is based on a combination of factors such as residential status, nature of income etc. Those who have stayed in India beyond certain prescribed threshold period would qualify as ordinarily residents and be taxable on their worldwide income. Nothing out of the ordinary here – you might wonder. What if the same income is subject to tax in the overseas jurisdiction as well? A classic case could be of an individual earning interest income from his bank account in Japan and taxed therein.

Co-working firms expect GST relief

The Indian co-working industry has seen a phenomenal growth in the last few years. However, there are some key changes that co-working firms are expecting around GST and taxation in Budget 2019. Input tax credit under GST is an important issue that concerns the sector. The companies are expecting that the government would enable co-working firms to claim input credits on work contract and construction services supplied, as detailed under GST provisions. This would check the increased outflow of cash that co-working firms are currently experiencing.