Make or Break Budget
All eyes are on the Union Budget to bring the floundering Indian economy back on track
The Union Budget comes at a time when the Narendra Modi government desperately needs some good news. The last few months have been replete with strife, protests, and a plummeting economy that is gasping for breath. Recent state elections have not swung BJP's way either. The party's acceptance rating among the masses is at its lowest in the last six years. A strong, well-intentioned budget with an achievable long-term vision will be a boon for both, the current dispensation and the economy that is at a 42-year low.
This budget is by far the most challenging one faced by a Finance Minister in over a decade. The economy is under stress from all sides with dismal growth, lacklustre consumption and high inflation. Numbers suggest that the country's current GDP (5 per cent) is languishing at an 11-year low while private consumption (5.8 per cent) is lowest in 7 years, agriculture choking at 4.8 per cent, manufacturing at a 15-year low of 2 per cent and meagre investments forthcoming at 1 per cent (17-year low). During all this, prices have been burning bigger holes in people's pockets with a singeing burn rate of 7.35 per cent. High fiscal deficit, tax shortfall and sluggish bank credit have been stymieing growth. So, in this clime, it's not just the government that needs a hearty, well-received Budget; industry, corporates, startups and the common man are all praying for one.
The Union Budget comes seven months after the government presented its last one after a historic win at the Lok Sabha polls. Going by analyst predictions, this Budget is all set to increase public expenditure, particularly rural spends. Tax cuts, including easing of income tax slabs, may bring some reprieve to people. Finance Minister Nirmala Sitharaman would do well to depend on borrowings to meet the fiscal deficit targets without compromising expenditure. The focus on infrastructure is likely to continue while further simplification of taxation may aid the FM to widen the tax net. Rationalising GST would be an immediate boost to all industries and sectors.
Heeding the wishes of the PE-VC investor community may provide further impetus to the dwindling economy. Tax parity for listed and unlisted shares, allowing AIFs (Alternative Investment Funds) to invest in NBFCs (Non-Banking Financial Companies) and domestic pension funds to funnel 1 per cent of their assets to AIFs, as well as permitting taxation of unlisted ESOPs only on liquidity would go a long way to strengthen investor confidence. Foreign investors too will be keenly watching the budget for vital signs that reinforce the government's commitment to an open economy. Recent trader protests against Amazon, India's decision to not join the Regional Comprehensive
Economic Partnership (RCEP) and
confusing, unpredictable laws have forced foreign investors to withdraw from the country and don on a hawkish attitude.
Social sector too demands greater spends and hopefully, the FM won't disappoint as in previous years, with larger budget allocations this time towards health and education. Putting money back into the hands of the "Aam Aadmi" would do wonders to boost consumer sentiment. The middle class has been squeezed long enough, it's time to lower income tax slabs, bring back medical reimbursements and travel allowance. Measures to improve women participation in the workforce would hold in good stead.
Only urgent measures can resuscitate the Indian economy and truly put it back on the $5 trillion growth trajectory. And, it must be a holistic budget where all sections of society are pandered to, from the markets to the social sector, from startups to the man on the road. Fumbling now could throw the economy further off-track from reaching its goals. But timely intervention may just about save it from sinking.
Shutapa Paul is an author and media entrepreneur. Views expressed are strictly personal