Modi Government 2.0's First Budget: Will Finance Minister be able to Meet These Challenges?

Jul 04 2019 11:20 AM
Modi Government 2.0's First Budget: Will Finance Minister be able to Meet These Challenges?

NEW DELHI: Union Finance Minister Nirmala Sitharaman will present the first budget of the Modi government 2.0 on Friday. The country's first full-time woman finance minister is going to present the Budget at a time when challenges have increased due to low growth rate, job slackness, declining savings and consumption, sluggish monsoon, global sluggishness and trade war. Will she be able to revive India's growth engine? Put the big budget potential at a glance...

1. Growth rate
Finance Minister Nirmala Sitharaman may take some major steps to boost growth. The growth rate has come down to a five-year low. The economy grew at a pace of 7.5 per cent in FY 2015, compared to 6.8 per cent in FY 2018-19.

2. Measures to increase by preventing a decline in savings
Savings are continuously declining. The Government will have to take note of the measures to check the decline and increase in savings. Tax incentives can be announced to save more families. While savings accounted for 32.1 per cent of GDP in FY14, it stood at 30.5 per cent in FY16.

3. Revision of Fiscal Roadmap
The fiscal roadmap can be amended to provide incentives. The fiscal deficit target for fy 2020 was set at 3.4 per cent of GDP as against 3.5 per cent in FY17 and 18.

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4. Tax cuts to stimulate consumption
Finance Minister Nirmala Sitharaman is likely to announce a tax reduction to encourage consumption. Under the scheme, the exemption limit for all taxpayers can be raised from Rs 2.5 lakh to Rs 5 lakh. In addition, uniform corporate tax for all companies is likely to be announced at 25%.

5. Package for Rural India
Sitharaman may announce some measures to boost spending in rural areas. If interest rates can be reduced for farmers, direct benefit transfers can be used for manure. In the interim budget, the Central government had allocated Rs 60,000 crore for MANREGA, which was Rs 38,500 crore in the financial year 17.

6. Increase in Disinvestment
Finance Minister Nirmala Sitharaman is likely to move at a faster pace on the path of disinvestment. Disinvestment of Rs 46,246 crore was announced in FY17, while Rs 1,00,000 crore was announced in FY18. The interim budget was set at a target of Rs 90,000 crore in 2020.

7. Announcement of new taxes
The Government may also announce some new taxes to increase the revenue. If long-term capital gains can be increased, the government can roll back the inheritance tax. Revenue from banking transaction tax can be increased. Besides, the surcharge can also be levied on higher incomes.

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8. Labour reforms to increase employment
Long-pending labour reforms can be promoted to increase employment. It will bring flexibility in the rules for employing and removing employers. More incentives on appointments and increase in government jobs can be taken. Incentives for startups may also be announced.

9. Package for Water Crisis
The water crisis in the country is continuously deepening. This time the Central Government has set up a separate ministry 'Water Shakti'. In this Budget, the government will set up a separate fund for water. A large amount can be allocated under this. In 2001, there was 1,816 cubic metre of water availability per capita which is expected to remain at 1,340 in 2025 and 1,140 cubic metres by 2050.

10. Emphasis on infrastructure
Spending in the infrastructure sector can be increased. Some major projects may be announced. Bonds can be brought in to raise funds.

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