Budget 2017: Achche Din- Still Elusive?
Sunday, January 29, 2017
This year, the government is changing the British-era legacy by presenting budget on February 1, instead of on the last day of February, for faster completion of formalities of budget exercise and policy implementation. Further, for the first time there will be no separate railway budget as the same will be integrated with the general budget.
This is fourth and third full-fledged budget under the current regime, still Achche din are distant, as was promised, there is big anxiety among common people as well as different sectors across the economy.
Finance Minister Arun Jaitley has mammoth task in budget, as due to sudden post demonetization, there was near crisis situation in the economy due to various aspects of flawed implementation.
Finance Minister has challenging priority task of reversing the sudden economic down turn while continue the long awaited reforms and fulfilling common people aspirations.
Before demonization, Indian economy was bright spot in global scenario with GDP growth about 7.6%. But due to sudden demonization, cancelling 86% of the currency, GDP is expected to be declining to 6.6% (IMF Estimate) and will be around 7.2% in next year. Some private institutions have more pessimistic predictions.
On the backdrop of demonetization more challenges are surfaced apart from usual challenges which are:
•According one estimate, in the period of demonetization micro industries suffered 34% job losses and 50% of revenue.
•Indian auto industry has registered around 18.66% decline in Dec-16 sales, which is the worst in last 16 years.
•As per RBI, bank credit growth for the month of December is the slowest in last 16 years indicating that businesses have not enough activities requiring bank money.
•Another major disappointment may be faced as Govt. couldn’t get estimated “Windfall Gain” out of painful demonetization exercise.
As per estimates, Govt. was expecting around Rupees 3 to 4 lakh crores windfall profit, which could have been real booster for economy. But now, it is estimated to be much lower compelling the Finance Minister to redo his calculations.
Above challenges thrown by demonetization, which hopefully are short term, there are already legacy issues, affecting the growth which has to be addressed by the Finance Minister.
•Non-Performing Assets(NPA)and under capitalization of the banks: As per RBI estimates in June- 16, Gross NPA stood around whopping Rs.6 lacs crores affecting banks.
•Ease of doing business: Even after so much of marketing, the ground reality in ease of business is not changed.
•Consistency in tax regime: Still General Anti Avoidance Rule(GAAR)issue is not resolved amicably and the looming uncertainty as to recent flip-flop by Central Board of Direct Taxes (CBDT) on Foreign Portfolio policy (FPI).•How to increase collection of taxes without hurting populist sentiments.
Economic development is an ultimate objective of any govt. which will help in sustainable good standard of living for its citizens, full employment and better social conditions.
Govt. expenditure is the foremost catalyst of economic development of any country. This can be done through development, social and infrastructure projects as those will have cascading effects on development process. It’s good that the govt. has realized importance of scheme like MNREGA which it had addressed before like digging pit.
The robust tax collections as of Dec-16 is very positive sign indicating demonetization effects would be short term and will have more funds at its disposal for developmental projects.
Further, private investments, consumption and exports are also fundamental to economic growth. For quite a long time, private investment cycle is not picking up and exports are improving marginally due to global economic conditions.
India has always been a good consumption story due to huge population and to boost economy, Finance Minister is expected to adopt this route to stimulate consumption, propelling development.
It means he has to place more disposable income in the hands of people and thus is expected to announce number of decisions in coming budget like:
•Reduction of income tax for individuals
•Rationalization of tax rates and slabs
•Reduction of corporate income tax for promoting investment cycle and entrepreneurship
•Making way for further reduction of interest rates by containing fiscal deficit.
•Offering rebate for interest paid on housing loans
•Sops for first time home buyers
•More outlay for MNREGA
•Incentives for manufacturing sector
•More outlay for Skill India/ Make In India
•Boost for rural economy
•Widening tax net.
•Clarity on already announced schemes (PMAY, GST)
Finally, Achche din is synonymous with development of the country. Before economy takes downturn, Finance Minister is expected to present transforming pro development budget which will envision for sustainable and equitable growth for all citizens, so that the Achche din will not be a distant dream.
| ||Salim Desai is Chief Financial Officer (CFO) with Al Razzi Holding Co KSC He holds MBA, CMA, CIPA and also passed CPA He is an expertise in Finance analysis and Investments and passionate educationist |
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