Now only a few days are left to present the Union Budget 2020. The work of printing of the budget has started and it will be presented on 1 February 2020.
Few Days Left For Union Budget
Now only a few days are left to present the Union Budget 2020. The work of printing of the budget has started and it will be presented on 1 February 2020. This will be the second full budget of Modi 2.0 term. Finance Minister Nirmala Sitharaman has great expectations from every mango in the country to the special that she will give some gift from her person to the companies in the budget.
Different classes and stakeholders have their own demands. Some demands from a sub-class of stakeholders, which if implemented, can bring changes and boost the economy, such are…
1. Personal Income Tax Rates
With the reduction in corporate tax last year, the Finance Minister talked about giving some relief to individual taxpayers in a similar way. Expectations to cut the tax rate or make some changes in the slab or exemption limit are high. If this happens, the middle class will have the ability to spend more, which will boost consumption and increase demand. However, the finance minister will look at fiscal prudence as there is limited scope to tamper with the personal income tax due to the low base of taxpayers in the country.
2. Promoting the income of the villagers
As our economy is still largely agricultural based, increasing rural income through fiscal stimulus and other measures will help a lot in increasing agricultural income. Higher income and savings will increase rural demand for discretionary goods. This has a direct impact on the consumption of goods and products such as mobile phones, tractors, agricultural equipment and FMCG (fast moving consumer goods) products.
3. Disinvestment target
The government has recently launched a bond ETF as part of the disinvestment strategy. It had earlier launched two exchange traded funds – CPSE ETF and Bharat 22 ETF, which were listed on the stock exchanges. The disinvestment target is expected to be close to 1 lakh crore this financial year as the government prepares for strategic sales of Air India, BPCL and Concor. The government is also considering reducing its stake in some PSUs to below 51%.
4. Promote Infrastructure
Infrastructure is still to be taken up on a large scale and on this front there are great expectations from this budget. The low level of employment rate which is deteriorating over time will be boosted by the huge increase in government spending in intensive labor projects like road and highway development, railways, irrigation and waterway development, real estate etc.
5. Financial and other major sectors
Although the RBI cut rates five times in 2019, the impact on credit demand and money flow from rich to poor was limited. Increasing liquidity and credit demand and flows will be a focus area for the Finance Minister. Industrial production has gone down significantly in the last few quarters. The major industrial index is continuously going down, which includes eight major industries such as electricity, steel, coal, crude oil, cement, natural gas and fertilizer.
The outlook for these areas has been largely negative for some time. The Finance Minister is expected to address it in the budget by announcing special measures or policy changes.
6. Improvement in equity market
The elimination of long-term capital gains tax can serve as a very positive act in boosting sentiment. Participation in equity markets in India is very low and LTCG tax has only increased the problem. Another tax needs to be rationalized is the Dividend Distribution Tax (DDT). The tax should ideally be levied on the person receiving the dividend. Currently it is levied on the company that declares and distributes it.
(Article By: Harsh Jain, Co-founder and COO, Groww)