Union Budget 2017 Expectations
1/5/2017 3:47 PM Thursday
The Budget for FY18 is scheduled on February 1, 2017 against the normal schedule of February-end. While it is expected that the government's tax revenues would rise substantially on account of demonetisation and owing to widening of the tax base due to Income Disclosure Scheme. This budget is also special, as for the first time, the railway budget will not be a separate event as it will be incorporated into the general budget itself. Considering the rough run up to this budget, the expectations of ‘feelgood' factors being highlights of the Union Budget 2017-18 are high.
The budget for the Central government is about Rs.20 lakh crore. As per government, its revenue is likely to remain about Rs.16 lakh crore for the current year. The shortfall in the income will be bridged through borrowings.
After so much announcements and reforms, some action plans are expected from the government. The Union Budget FY18 is likely to be taxpayer-friendly after the painful implementation of demonetisation drive.
There is a lot of buzz around Budget 2017 which will be presented on February 1. We are expecting a landmark budget with radical measures. NITI Aayog along with four to five sectoral groups have been set to discuss new initiatives and budget proposals. The government is in a sweet spot in terms of fiscal situation and has space to roll out stimulus in the budget for FY18. The effort will be to cushion the impact of the demonetisation drive starting from the new year. Meanwhile, aggressive correction in the market has factored in Q3FY17 earnings.
The NDA government is changing track by incorporating the railway budget into Union budget, instead of presenting the railway budget separately as has been the convention till now. This is a dramatic departure from the 92-year-old convention. The process of preparing the railway budget remains unchanged. A single appropriation bill would be prepared with the estimates of the railway budget as well. The reasoning behind the move is to save time for the government by not having to table two separate bills in the parliament.
Tax reforms are few of the major radical changes expected for the upcoming Union budget. The Goods and Service Tax (GST) is at an important stage as it expected to be implemented from April 1, 2017. The government will also have to see allocation of funds for various sectors to expedite growth of the economy.
After demonetisation drive for curbing black money, some positive announcements are eagerly awaited from Union budget to provide relief to the common people as well as the business class. The government may come up with new income tax slabs for the salaried class. At the same time, there may be reduction in corporate taxes in a phased manner.
In the run up to this budget, the Indian economy was comfortably growing at a rapid pace by registering a GDP growth of around 7.6 per cent in the second quarter of FY17 until November 8, 2016, when PM Modi announced demonetisation of high value currency notes. The decision was initially welcomed by one and all in the hope that it will clean up the economy by combating rampant use of illicit and unaccounted cash. However, the move has caused significant damage to the economy which was sailing smoothly before demonetisation. The economy also seems to be getting ready to shift gears further. As of now, demonetisation is expected to have lasting impact on several vital segments of the Indian economy, including automobiles, FMCG and scores of other cash-dependent businesses.
As with every Union Budget, there are always those built-in expectations from the business community and investors, along with the public at large. This budget too does seems to suggest the high expectations that corporate India has from the current dispensation. This budget also holds significance for the NDA government as it comes post the aftermath of ‘surgical' currency demonetisation by the government which has resulted in a slump in demand leading to an economic slowdown in the short term, and consequently hurting all the allied sectors and industries in the country. Therefore, all eyes would be on the Union Budget which is expected to be high on substance and less on the rhetoric given the amount of pain that the country had to go through in the 50-day demonetisation period.
In the upcoming budget, expectations are that a significant part of the budget will focus on taxation which seems to have been a growing chorus going into the budget session this year. The FM too had announced in his previous budget speech that the overall tax rates would be bought down in order to widen the scope of tax base which will be aided by both the income declaration and demonetisation. This will certainly allow the government to lower the tax rates and at the same time make India an attractive destination for foreign investors in line with other global emerging markets.
The government will likely focus on both corporate and personal taxes. However, it is imperative for the government to do more for job creation as that would ultimately boost demand and positively impact private consumption. Special emphasis need to be placed on railways as the railway network is the back bone of the country's economy. Huge capital infusion is needed in railways to put it on the right track if India has to achieve double digit growth rate in the years to come. The FM needs to do more for start-ups, more for incentivisation for job creations in organised sector, more on skills development, more on training and re-training. These are the key areas which will certainly need prime attention even as the government expends more on social spending such as healthcare and education.
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