New Delhi: While we all are waiting for the budget coming on February 1, Finance Minister Nirmala Sitharaman will present the Union Budget 2020 on February 1, 2020. This budget assumes special significance as it will be presented in the backdrop of a slow economy, poor demand and lowest GDP in almost 11 years. The recent inflation numbers of 7.35% in December have added to the negative sentiment. Harsh Jain said that different classes and stakeholders have their own demands. Some key demands from a sub-class of stakeholders that can bring change and boost the economy are listed here:

Personal Income Tax Rates: With corporate tax cuts last year and while the finance minister talked about giving some relief to individual taxpayers in a similar way, expectations of tax rate cuts or slabs or some changes in the exemption limit are more. This means that the middle class will have the ability to spend more, which will boost consumption and increase demand. However, the finance minister will look at fiscal prudence as there is limited scope to tamper with the personal income tax due to the low base of taxpayers in the country.

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Boosting the income of the villagers: As our economy is still largely agricultural-based, increasing rural income through fiscal stimulus and other measures will go a long way in increasing agricultural income. Higher-income and savings will increase rural demand for discretionary goods. This has a direct impact on the consumption of goods and products such as mobile phones, tractors, agricultural equipment, and FMCG (fast-moving consumer goods) products.

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Disinvestment target: As part of the disinvestment strategy, the government has recently launched a bond ETF. It had earlier launched two exchange-traded funds - CPSE ETF and Bharat 22 ETF which were listed on the stock exchanges. The disinvestment target is expected to be close to 1 lakh crore this financial year as the government is gearing up for strategic sales of Air India (bid again), BPCL (underway) and Concor (underway). The government is also considering reducing its stake in some PSUs to below 51%.

Promotion of Infrastructure: Infrastructure is still to be taken up on a large scale and there is a lot of expectation from this budget on this front. The low level of employment rate which is deteriorating over time will be boosted by the huge increase in government spending in intensive labor projects like road and highway development, railways, irrigation and waterway development, real estate, etc.

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Financial and other key sectors: Although the RBI had cut rates 5 times in 2019, the impact on credit demand and money flow from rich to the poor was limited. Increasing liquidity and credit demand and flows will be a focus area for the Finance Minister. Industrial production has gone down significantly in the last few quarters. The major industrial index is continuously going down which includes 8 major industries such as electricity, steel, coal, crude oil, cement, natural gas, and fertilizers. The outlook for these areas has been largely negative for some time. The Finance Minister is expected to address it in the budget by announcing special measures or policy changes.

Equity market reform: Elimination of long-term capital gains tax can act as a very positive act in boosting sentiment. Participation in equity markets in India is very low and LTCG tax has only increased the problem. Another tax needs to be rationalized - Dividend Distribution Tax (DDT). The tax should ideally be levied on the person receiving the dividend. Currently, it is levied on the company that declares and distributes it.

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