Mumbai: Amidst the economic slowdown, all eyes are on Union Finance Minister Nirmala Sitharaman and her first full-fledged annual budget for 2020-21, with definite proposals to accelerate growth and thereby help India join the $5 trillion club by 2025.
Experts said that the thrust of the Budget would primarily be directed at raising investment and consumption levels which involve substantial employment generation. This could largely be through the infrastructure development route, entailing higher capex. Higher allocations towards capital (infrastructure) spending and the resultant employment opportunities generated would in turn lead to higher consumption.
Sitharaman may provide much debated relief in income tax, propose a slew of steps to boost development in infrastructure and generate employment across the sectors. The much-awaited relief in income tax rates or slabs will put additional income in the hands of the salaried middle class. This is expected to promote consumption.
CARE Ratings in its analysis, however, has observed that there would be revisions in the tax deductions that could benefit tax payers belonging to different income groups; this would also increase their disposable income and thereby consumption, it is reasoned.
There is a possibility that the FM may increase standard deduction from the current Rs 50,000 to Rs 75,000 per annum. In the 2019-20 Budget, the limit was raised by Rs 10,000. Sushil Jiwarajka, former president of Infrastructure & Logistics Federation of India, said the FM may lay stress on increasing public expenditure and increasing the purchasing power of the lower and middle class.
As regards promoting job creation, Federation of Indian Chambers of Commerce and Industry President Santia Reddy is hopeful of direct tax incentives for business that will create employment. At the same time, she expects the government to lay emphasis on mass entrepreneurship programmes for rural India.
On promotion of rural economy, KPMG India observed that rural consumption has been key to India’s growth. Fast-moving consumer goods and retail majors have witnessed major sales uplift from rural areas, mainly driven by increased disposable income coupled with a change in aspirations and increased awareness about brands. The focus could be on additional efforts to support rural growth and development. That would mean a good set of initiatives towards improving the rural infrastructure and driving rural consumption,'' it said.
On infrastructure development, the FM has already announced a comprehensive NIP plan for projects worth Rs 102 lakh crore. However, the Budget will need to make provision for funding many of these projects.
Deloitte India has suggested a review of existing guidelines around investments by insurance companies, pension funds, and other long-term investors in infrastructure-related instruments and financing vehicles, such as infrastructure investment trusts and municipal/corporate bonds. Further, it wants the government to provide direct tax concessions to investors in infrastructure-related special purpose vehicles/financing vehicles.
On the other hand, CARE Ratings said given that the government has faced several challenges on the revenue side while trying to balance the budget in FY20, and there is scope for a modicum of flexibility in the fiscal policy. ''Additionally, some sector-specific measures and reforms that have been coming in the way of output or weighing down the sectors, too, could find a mention in the Budget.
But this may be have a limited canvas, as the government has already announced several such measures in the last few months,'' it added.
