Expectations from The Union Budget 2017-18 in India
Goods and Services Tax popularly known to GST, has been a major talking point and a bone of contention between the central and state governments over the last few months
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The Union Budget 2017-18 is definitely unique even historic in many ways. For starters, it will be presented on a much earlier date of 1st February as opposed to the usually date of 1st March. If this wasn't enough, this budget is also special, as for the first time, the Railway Budget will not be a separate event and will be incorporated into the General Budget.
In the run up to this budget, the Indian economy was growing at a rapid pace registering GDP growth of around 7.6% and then the brakes came on as a result of the unexpected demonetisation announcement. The decision though commendable from the combating black money aspect, has caused significant liquidity issues in the economy. As of now demonetisation is expected to have lasting impact on a number of segments including automobiles, FMCG and a plethora of other cash-hungry businesses.
Considering the rough run up to this budget, the expectations of "feel-good" factors being features in the Union Budget 2017-18 are pretty high. Hence a series of populist policies are expected in this year's budget. The following are some of the key expectations from Budget 2017-18:
Revamped Income Tax Structure
Many corporate entities, bankers and even the general public at large had hoped for a change in the Income Tax slabs. As a result of the anticipated decline in customer spending, this year's budget is expected to finally introduce a change in the current taxable income tax slab. If new IT rules in fact come into effect, they might just be applicable to both individual tax payer as well as corporate entities. Already some media outlets have reported that the Government is planning to revise the current 2.5 lakh to Rs. 4 lakhs per annum as the minimum taxable income in order to ease the pain of demonetisation. Though the increase might not occur to that an extent, any upward revision of the minimum taxable income slab will be cheered by the salaried and self employed alike.
Introduction of GST
Goods and Services Tax popularly known to GST, has been a major talking point and a bone of contention between the central and state governments over the last few months. With the winter session of Parliament being washed out as a result of demonetisation protests, this year's budget is expected by many to feature the introduction of a much watered down version of the GST. But, this will definitely be cheered by many businesses as it would make the task of estimating and filing their taxes much easier.
Measures to Promote Cashless Transactions
Taking into account the government's hints that the entire value of the demonetised notes will not find their way back as cash into the economy, the next budget is also expected to promote cashless transactions. Some of these such as discounts when using cards at toll booths, waiver of merchant discount rates when using debit cards at POS terminal, etc. have already been implemented though for a limited time. Additional benefits to those opting for cashless transactions through credit cards, debit cards and mobile wallets are expected to be part of the Union Budget 2017-18. Additionally, there might also be benefits announced for use of payment bank services that mainly target the unbanked and under-banked sections of society.
Increased Investment in Railways
As a result of the merger of the Rail Budget with the Union Budget, there is all the more reason for the Finance Minister to introduce populist measures that focus on further development of infrastructure. The modernization of railways is long overdue and the recent Kanpur accident is expected to give further impetus to government spending on railways modernization. Additionally, like every year we can expect a few new trains that would be launched.. Don't expect A/C fares to get reduced this budget, but there might be a downward revision of passenger fares for non-A/C classes to boost positive sentiment among voters in the lower economic strata, who are the hardest hit by the demonetization announcement.
Further Boost to Government Plans
Another measure to shore up sentiments among investors would include government plans to boost start ups and businesses like Skill India, Make in India, Start-Up India, etc. through tax breaks and other goodies. These measures as well as additional measures that would help start-ups raise seed capital cheaply would definitely be something that the government will consider. This has specially become important considering that subsequent to demonetisation, the Sensex lost all the gains it had made in 2016 within 8 to 10 trading sessions. Moreover, with the Fed rate hike announced from January onwards, a large proportion of foreign investment is expected to leave India and head back to the US.
Affordable Housing Measures
Last year's budget included some key announcements that promoted low cost housing and offered cheaper home loans to individuals who opted for amounts of up to Rs. 35 lakhs during the 2016-2017 fiscal. These benefits might be extended for the 2017-18 period. Moreover, there might be additional tax breaks for those involved in the construction of such affordable housing.
Measures to boost Agriculture
There have been widespread media reports of farmers being unable to sow Rabi crops due to the unavailability of new currency notes in sufficient numbers. If the reports that large areas of agricultural land have remained unsown are true, food inflation is definitely going to cause a major problem in the coming months. Add to this the fickleness of the monsoon season and the government may be looking at the possibility of a food crisis in the coming months. Keeping this in mind, it is expected that farmers might get some additional benefits as well as greater access to cashless transaction modes so that they can purchase seeds, fertilizers and other agricultural essentials with greater ease.
Increased taxes on Tobacco, Alcohol, Luxury Goods and imports
The prices of tobacco products and alcohol have historically been increased in every budget as these have been a perennial source of revenues. Going forward, we can expect more of the same and the price of imported goods such as high-end electronics, imported automobiles as well as gold is also expected to rise as the government attempts to increase indirect tax revenues subsequent to GST implementation, make imported items less attractive to control its budget deficit and simultaneously promote the Make in India initiative.
All said and done, the Union Budget 2017-18 is expected to be quite different from many of the previous ones and even though no sweeping changes are expected to occur. The above write up is about expectations and the main one that will be top of the mind would be the government's desire to create a positive feeling for the future so as to boost investor confidence both domestic and international.