Even as unprecedented level of curiosity and interest are building up as Finance Minister Nirmala Sitharaman gears up to present the Union Budget in less than two weeks – the first since the outbreak of the devastating Covid-19 pandemic, sources said that there is unlikely to be any major tax benefits for the 5.5 crore people who pay income tax.
Though many economists have prescribed a cut in personal income tax rate, sources said that this may not be possible immediately. The government’s budget deficit – when expenditure is more than revenues collected from taxes and other sources– has soared due to the various economic packages and welfare measures that have been given to support the economy badly hit by the outbreak of the pandemic and the subsequent stringent lockdowns. This has left no room for Sitharaman to offer any tax benefits to the salaried class, especially those in the higher income group.
However, sources said that the budget is expected to outline several measures that will boost consumption, something that is yet to reach the pre-Covid levels. So, expect tax rebates on home loans which would boost big ticket spendings for purchase of houses.
“People must be incentivised to spend more, the government is looking at ways which would boost demand. Measures relating to easing of supply side have been already put in place, though they need to be further tweaked to ensure that there is not discrepancy. But the focus will be on measures boosting demand,” a person familiar with the developments said.
Manufacturing boost
The budget is also expected to outline ways to further boost the manufacturing sector and the Atmanirbhar scheme plank. Industry sources said that many companies are eagerly waiting for the Budget announcements to firm up their plans of setting up manufacturing facilities in India which will spur growth and create more jobs in the economy .
Prime Minister Narendra Modi has underlined the need to Make in India for export purposes.
“As many companies are now looking to relocate their manufacturing facilities outside China especially after the Covid 19 impact and subsequently with issues relating to business tycoon Jack Ma, India will be their ready choice, provided the right support is promised by the government,” the analyst said that time is precious and the existing hurdles need to be removed at the earliest.
Eye on jobs
There will also be a major focus on mega infrastructure projects such as roads, highways and ports to generate more employment. “This will not only generate more jobs but spur consumption, which is the main ethos of this budget,” according to a reliable source.
the major focus will be on employment generation, the government is set to increase its spends on
The main thrust of the budget will be on schemes for the agriculture sector to boost famers incomes and cater to the employment generation and social welfare of the rural poor.
Focus on disinvestment
The disinvestment exercise of the government is yet to take off and yield results as the pandemic came as a bolt from the blue and disrupted plans. While a host of big ticket disinvestment plans are already on the drawing board, they haven’t fetched results. “We need to have a relook at this exercise and remove the main deterrents,” an insider said. Biggies such as national carrier Air India and Bharat Petroleum Corporation (BPCL) are on the disinvestment list and will be pushed through this year as the fight against Covid yields results.
$5trillion economy goal to take longer
Sources also said that the set goal of achieving $5trillion economy by 2024 could be deferred by a a year or two. “As the pandemic hit the economy like never-before, the set target of $5 trillion economy by 2024 may have to be postponed by a couple of years,” an analyst said.
While India registered a 23.9 per cent contraction in the April to June quarter primarily due to a stringent Covid 19 induced lockdown, in the second quarter the country’s GDP declined by 7.5 per cent.
