Expectations: Union Budget 2017-18

Due to the disruption from the demonetisation drive, GDP growth rate in financial year 2017 may dip a little compared to the last 2 years, but even then India is likely to outpace most other major economies. Given the global geo-political situation, our focus should now be on how to unleash India's domestic potential and stimulate domestic demand that can keep our economy on a long-term high growth trajectory.

Union Budget 2017-18 could ideally focus on three key themes:

Building, revamping, and modernising India's physical infrastructure;

Tax rationalisation and widening of tax base; and Skill development

Electricity being a critical input for every sector of the economy, every possible step must be taken to ensure that power is made available to the end consumers at affordable rates. In this regard, transferring subsidies directly to target consumers (as in case of LPG cylinders) makes more economic sense than state governments giving subsidies to power distribution utilities so that they can sell electricity to consumers at subsidised rates. The subsidy payments by state governments are irregular and the delays lead to financial woes for the distribution companies. Through the direct benefit transfer scheme, only the actual consumption, and not the power pilferage and losses, will be subsidised. Also, the distribution companies, when no longer dependent on state governments, will be able to function autonomously and can be run professionally.

The decision to keep electricity outside the ambit of GST will drive up cost of power to end consumers. Generation companies will have to pay GST on their inputs, namely fuel and machinery, while they will not be able to avail input credit as their output, i.e. electricity, is exempt from GST. The burden of the extra cost will ultimately be borne by the end consumers. Therefore, it is essential to bring electricity within the coverage of GST. The coming budget marks the merging of the Rail Budget with the Union Budget. This provides an opportunity to plan optimal utilisation of resources. Rail and road being the two principal modes of surface transport in India for both passenger and freight traffic, it is important to ensure proper co-ordination between these two key ministries. Capacity creation in the two sectors should be planned to ensure that they complement each other, and not compete.

On the financing front, new products like Bid Bonds, Credit Enhancement Method, Swiss Challenge Method, Bullet Loans, etc. can be tried out. Leasing needs to be revived in India. Worldwide it has been the most potent form of capital creation. It is the most cost effective instrument as well which makes it all the more relevant for India as here the vast majority of infrastructure players belong to the MSME category.

Additionally, the government should make funds available to take care of the costs incurred on arbitrations resulting from the various disputes that infrastructure projects run into.

The tax net should be widened. A recent study shows 45 per cent of India's ultra high net worth individuals reside in non-metros. This includes the rural rich. It makes no sense to keep them out of the tax bracket just because their principal source of income is agriculture. Corporate tax rate should be reduced to 25 per cent. For fuel consumption, rationalisation of income tax rates is called for:

The annual medical allowance limit should be increased from Rs. 15,000 to Rs. 50,000, as the same has not been revised since 1/4/1999

Various recommendations made by the Easwar Committee for simplification of tax laws in the country, as well as to avoid litigations and to increase 'ease of doing business' should get accepted.

Government must stick to GST roll-out on April 1, 2017. Further, the average GST rate must be brought down to 15 per cent and the maximum rate to 25 per cent. A tentative timeline for the achieving the same may be provided in the budget.

There should be single tax administration authority under GST for any business. Multiple authorities can lead to increased tax disputes due to difference in interpretation of tax laws by different persons. Ideally, GST on turnover up to Rs. 1.5 crore can be handled by the State Government, and anything above that can be handled by the Central Government.

Keeping in mind the multiplier impact that they have on the economy and the kind of employment they generate, key infrastructure assets like roads, railways, power, ports, airports, etc. may be exempted from GST (or maybe taxed at the lowest GST rate). The gems and jewellery industry may also be taxed at the lowest GST rate as this sector is a major contributor to Indian exports and creates millions of skilled jobs.

The Fourth Industrial Revolution is unfolding some disruptive technologies shaping up in the form of automation, robotics, 3D printing, Artificial Intelligence (AI), genomics, and many others. These will threaten many existing jobs, at the same time will open up many new areas of job creation, especially in the services sector. The world is not fully prepared to meet the requirements for the emerging jobs as these will demand altogether different skill sets. India has abundant manpower, majority of which is young. We now need to create institutes which can equip our people with the right skill sets so that India can emerge as a skill supplier for these new jobs. To impart such training, apart from creating new institutes, we also need to increase both the quantum and quality of training staff in India. We can think of launching a 'Train the Trainers' programme.

This budget can lay out a blueprint for such skill development initiatives and announce fiscal incentives to that effect. Fostering a partnership among government, industry and academia for this is very essential. Industry will be able to identify the emerging skill requirements and academia would need to assist in structuring the courses and setting the curricula. Foreign academics and universities, especially from developed countries, would also need to be roped in by leveraging the MoUs that the government has entered with other nations regarding technology and skill transfer. We should strive to create a global alliance of institutes for research, innovation, and technology development.