India pins hopes on Jaitley for balanced Budget

Finance Minister Arun Jaitley faces a tough task of balancing the needs of farm sector as well as the industry when he presents the Budget on Monday as he seeks to garner resources to boost public spending for higher growth amid global headwinds. On the income tax front, the Budget may continue with the status quo on the tax slabs while it may tinker with the exemptions. 

Rising rural distress because of back to-back droughts have put considerable pressure on the Finance Minister to spend more on social schemes, while at the same time he has to win back foreign investors craving for faster reforms. His difficulties have been compounded by the huge pay-out of Rs 1.02 lakh crore that will become necessary on account of the 7th Pay Commission recommendations for government employees. How much he does this without compromising on the previously-announced goal of lowering the fiscal deficit to 3.5 per cent of the GDP next year is to be seen. 

Jaitley is also likely to fulfil his last year’s promise of gradual reduction of corporate tax from 30 per cent to 25 per cent over four years. It is expected that he may begin the exercise in the Budget on Monday that may be accompanied by withdrawal of tax exemptions to keep the exercise revenue neutral. To shore up revenues to meet the increased expenditure, the finance minister may need to increase indirect tax rates or introduce new taxes. Service Tax, raised to 14.5 per cent last year, may see a hike to prepare for the level of 18 per cent being envisaged in the GST. 

Further, new cess to fund initiatives such as Start-up India or Digital India and other programmes is being speculated, similar to the Swachh Bharat cess levied last year. On his agenda would also be the revival of the investment cycle. While capital expenditure in 2015-16 increased by 25.5 per cent over last fiscal, as a percentage of GDP it is still stuck at 1.7 per cent and needs to go up to 2 per cent. 

“I have an exam on Monday,” Prime Minister Narendra Modi said referring to presentation of General Budget in Parliament as he gave a pep talk to motivate students appearing for board exams for which he even roped icons like Sachin Tendulkar and Viswanathan Anand. 

Modi said he was “full of confidence” ahead of his “examination” by 125 crore people, a trait which he wanted students to emulate when they appear for their Class 10 and 12 exams, starting Tuesday. In his monthly radio programme, he encouraged students to appear for exams with a “positive approach” and calm mind.