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17 expectations from FM Arun Jaitley's Budget speech

Domestic consumption has got a consistent beating over the past 3-4 quarters. GDP estimates have slipped to 7.1%. Industry output experienced a slide downward to a negative growth. Continuous inflationary pressures.

Saibal Sengupta        Last Updated: January 30, 2017  | 19:43 IST
v17 expectations from FM Arun Jaitley's Budget speech

Saibal Sengupta
Domestic consumption has got a consistent beating over the past 3-4 quarters. GDP estimates have slipped to 7.1%. Industry output experienced a slide downward to a negative growth. Continuous inflationary pressures. Demonetisation impact sucking out liquidity and stalling consumption. Uncertainty over GST roll out. To sum up, the economy is challenged by circumstances to hold its head high. While all efforts are being taken by the Govt to put long term reforms in place there are immediate short term implications that are affecting economic growth.

In this backdrop rather going for an all-populist budget on the wake of ensuing political developments, the need of the hour is to provide necessary fillip to spring up immediate economic growth, which is repeatedly striving to bounce back, coupled with restoring investor and consumer confidence.

FULL COVERAGE: UNION BUDGET 2017-18

1) Lowering Direct Tax rates - now that the tax collections have started showing uptick with a wider base, it's time to provide for tax relief in both personal and corporate tax rates. This should be step change and not marginal. Only moderate slab revision (last done in 2014) will not help in increasing disposable income to increase consumption.

Besides, FM should deliver his promise with the initial vision laid for gradually reducing the corporate tax from 30% to 25% over a span of 5 years, which has not been initiated as yet except for a token one through startups. This also includes aligning the Minimum Alternate Tax rates @ 18.5% and Dividend distribution tax @ 15%.

Also extension of timelines of MAT credit utilisation from 10 years need to be revisited as part of the tax reforms.

2) Lower Interest rates - With a huge mobilisation of cash inflows happening through demonetisation, another reduction of interest rates to provide room for spending, give a modest push to automobile and reality sectors.

3) Job creation - FM should give additional incentives for job creation like continuing and expanding tax breaks/ incentives on job creation as were allowed last year for fresh employment upto given cut-off Salary.

4) Infra booster dose - one of the quick wins for the Govt should be to roll out mega infrastructure development projects, rail, roads, highways, facilities, modernisation and the all-awaited 100 smart city project. All half-announced, half-done and half-hearted but immensely touted ambitions must be put on fast track time bound completion possibly under PPP model with specific planned Budget allocations. This will see accelerate project completion, ensure quick implementation, attract daily wage workers employment and quickly rebound the economy full throttle.

5) Energy efficiency - FM must make specific time bound plan expenditures to commit for highly focussed energy efficient policies in making substantial increase in carbon footprint and encouraging energy efficient consumption by highly incentivising use of solar and wind power beyond a threshold level.

6) Align Online - Continue aggressive online transactions push initiated in course of demonetisation. Govt should consider mandatory transfer of wages & salaries through online transfer for all income groups, link them with tax returns, encourage opening bank accounts under Jan Dhan Yojana.

The much promoted Govt campaign of online transaction should be heightened with an auto-credit of transaction linked incentive direct to the account just like an interest waiver.

However, all online measures must be strongly supported by high level of Govt sponsored cyber security measures, compatible technology enablement and most critical - uninterrupted high-speed and low-cost network availability across the country.

FULL COVERAGE: RAILWAY BUDGET 2017-18

7) Promote Savings - Govt should encourage savings through attractive Deposit schemes/ rates for drawing surplus idle cash on all accounts opened under Jan Dhan Yojana. Similarly for all other account holders Infrastructure Bonds and other higher return investment options should be worked out.

Besides, FM should also enhance tax incentives to mobilise savings.

8) Housing -a) Introduce Regulatory Authority for Reality Sector.
 b) Develop residential projects aggressively in Tier 3 cities and Rural through additional incentives.
c) Provide Housing to all income groups and all sections with layers of tax incentives starting at peak from first property holding by LIG gradually reducing and dis-incentivising for unused Investment property.

9) GST roll out - FM should make a specific announcement of an irreversible date of GST Roll out with quick release of full legislation @ final rates. This will give lot of headroom to all businesses, big or small, to get GST ready and herald a new era.

10) Indirect tax rate rationalisation - In a bid to attempt controlling inflationary trends whether pre- or post-GST, FM must look at indirect taxes rate rationalisation basis end-use of products by various sections of society. So within same product group whilst economy products and essential products mainly consumed by rural or weaker sections of society should be at a lower rate with step increase basis end use.

11) Social Security - The much-hyped National Pension Scheme introduced by the Govt has not garnered enough attraction or efficacy presumably because of tax incidence and low returns. This should be restructured and strengthened to meet its desired objectives.

Furthermore, Senior Citizens need more economic security which should be supported through higher return investments, incentives on tax incidence, heavily discounted  medical expenses.

12) Drive synergy in Govt Expenditure - Combining Rail Budget with the Master Union Budget in itself should give immense play to the Govt spending to synergise, optimise and rationalise. This will leave much room for higher Budgetary allocation on priority spending.

13) Government Subsidies - All subsidies should be eliminated except for the weaker sections of the society who are below poverty line. Furthermore, contractual workers and farmers who are genuinely impacted by reduced family income as a result of demonetisation and living in hardship must be supported by the Govt through one time  subsidy or making available essential goods through the PDS or by direct transfer of cash subsidy to the Jan Dhan accounts or any other means.

14) Capital inflows - inflow of fresh capital is key to re-establish investor confidence and proper economic growth. FM must make focussed announcements to scale up capital inflows.

15) Ease of business - Simplification and speed should be the mantra of the FM in this Budget to meet the Govt commitment of ease of doing business. Simplifying and streamlining tax administration, processes, reduced arbitrary powers of the administration, easing out bureaucracy, speedier completion of assessment, eliminate harassment, quicker dispute resolution and faster settlement of refunds will in many ways attract investments and entry into the tax net.


16) Effective implementation of Budgetary proposals - Speed of effective implementation of all budgetary proposals will be the key to quick economic growth.

17) Transformation overload - In a bid to set right good governance, the Govt should not be adopting too many transformational changes. This will lose focus on policy implementation and learnings from implementation lapses of demonetisation should be seriously introspected. GST rollout, ICDS implementation, change of fiscal year, Benami transaction bill, Real estate regulations, Online push, Digitisation, Startups, Skilling India, Swatch Bharat drive, Foreign Policy changes and many more. These are far too many on the cards in the midst of a struggling economic landscape will only get messy and would not be in good stead for the economic development and neither on political grounds.

Conclusion
While the FM is engulfed with a laundry list of to-do actions it is imperative that Government priorities are well set right to focus on key issues. Therefore it is desirable to enable policies for quantum leap in Consumption, infrastructure boost,  increasing liquidity,  address inflation, lift the rural and agri growth and job creation across sectors.



Saibal Sengupta is CFO at Usha International Limited

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