Pre-Budget Expectations: What Indians Aspire From FM
Budget followed by LokSabha elections; India is going to witness two big events this year. Albeit the present government has introduced the budget five times, this season it's a separate tale. While a friendly budget will support the Indians to improve their living, it will also support the NDA government to entice voters ahead of the upcoming LokSabha elections. Hint back by the blows in recent assembly elections, the government might veer from the conventional norms and announce some major & popular models to utilise them as a crowd-pleaser ahead of the elections.
“As the country heads towards the general elections, we expect the government to favour expansionary economic policies that would give space to growth-boosting measures with the interim budget,” says Rakesh Dugar, CMD, Mitashi Edutainment. In fact, Arun Jaitley indicated that this time the budget may go beyond vote-on-account. Last week through a video address from the US, he said: “The larger interest of the economy always dictates what goes into the interim budget, including addressing some of the challenges and the government could break convention and make the February 1 exercise more significant than a vote on account.” As Jaitley is undergoing surgery in the US, Piyush Goyal has been designated as interim finance minister.
Tax: Still Giving Indians Nightmares
Rumours are rife that the government might announce big changes. There is the talk of a Universal Basic Income (UBI) scheme that the Finance Minister might announce in the interim budget. The government is also expected to double the income tax exemption threshold to 5 lakh, reinstate tax-free status for medical expenses and travel allowances in a bid to offer better tax reliefs to people. This syncs with the wishlist of The Confederation of Indian Industry (CII) that has urged the government to double the income tax exemption threshold to 5 lakh and increase the deduction limit to 2.50 lakh. The body has also suggested lowering the highest personal income tax slab to 25 percent, tax exemption for medical expenses & transport allowance, and corporate tax rate to be reduced to 25 percent, & should be brought down to 18 percent in a phased manner.
Also, in a pre-budget memorandum, the MAOI has appealed to the Finance Ministry to, on priority, fix the lop-sided tax policies to create a level playing field between the Indian MRO industry and foreign MROs. The MAOI has demanded to reduce GST for Indian MRO services to five percent to bring it on par with foreign MRO services, &customs duty on MRO services to 18 percent, and it has also demanded grant of ‘Infrastructure’ status to MRO Industry. “Against the Indian GST of 18 percent, countries such as Singapore and Malaysia GST is levied at seven percent, and Sri Lanka does not levy any tax at all. No wonder that despite the Government opening up 100 percent FDI, no foreign player wants to set up shop here. Our most earnest request to the Government is to set this anomaly right, at the earliest or else the Indian MRO sector will close down,” says Bharat Malkani, President, MAOI.
Well, such steps will definitely help the education sector also. “Undoubtedly, lowering the GST rates from an existing 18 percent to expected five percent will make education affordable to students. The upcoming budget also needs to take initiatives such as allocating bigger spending on education, provision for proper teacher training along with higher pay and administrative incentives. Incentives need to be provided to encourage research in all disciplines and for augmenting the technical capacity of the central educational institutions like NCERT, NUEPA, IGNOU and many more. Furthermore, a comprehensive scheme on lines of Ayushman Bharat can be a great start to improve the quality of education,” adds RohitManglik, CEO, EduGorilla.
Resolving Farmer Woes
With Congress party’s loan waiver scheme in Madhya Pradesh, Chhattisgarh & Rajasthan attracting the farmers, the agriculture theme is likely to hog the limelight in the budget for the government. In fact, many analysts have already declared the interim budget as a farmer-oriented budget. Many economists expect the government to replicate a scheme adopted by Telangana & Odisha, and announce a direct transfer benefit scheme, monetary benefits and concessions for farmers. “We hope the finance minister renders enough attention to the farmer community and the middle-class section of the country. By extending financial support for PACs (primary agricultural societies) to undertake total computerization will facilitate the implementation of digital payment solutions. Also, Fintech companies working in rural India should be given subsidies for building awareness, which will enable them to onboard more and more rural population on to the digital platform,” says MandarAgashe, Founder &Vice Chairman, Sarvatra Technologies.
Enhancing ‘Make In India’& ‘Digital India’ Programs
Although the government has limited room for introducing significant changes, it’s expected to focus on schemes aimed at offering more benefits to the rural populace, revitalise growth by reviving the capex cycle, and promote domestic manufacturing. Rahul Garg, CEO & Founder, Moglix, says, “The recent policy amendment to the foreign direct investment (FDI) bill is ambiguous and can slow down the speed of start-ups in the country. The government should come up with regulations that simplify our life as entrepreneurs and makes it easy to run businesses.”
The ‘Make in India’ &‘Digital India’ programs that were introduced to drive India’s economy has produced not the desired results. For instance, the ANGEL TAX has triggered tax issues and is affecting entrepreneurs badly. Reflecting on the issue, V Raman Kumar, Founder & Chairman, CASHe, says, “The government should seriously consider abolishing the ‘Angel Tax’. It is hampering investments in start-ups. We expect the government to announce tax concessions in digital transactions which will, in turn, encourage electronic transactions across the industry. Also, a new policy framework for the adoption of newer technologies like Electronic National Automated Clearing House (e-NACH) and DigiLocker will help the industry and the end consumer at large. It should also further strengthen the Fintech and NBFCs who provide credit facilities to the interiors of the country besides providing solutions to avoid liquidity crisis. Offering relaxation will enable NBFCs to offer credit effortlessly and effectively. Setting up of refinancing organizations for NBFCs, similar to SIDBI, NABARD and others will help avoid liquidity crisis.”
While the government has taken some initiatives in recent times to foster Entrepreneurialism, the industry is expecting more such steps. “The move of the Govt. of India to increase the GST exemption limit to 40 lakh is a path-breaking pre-budget move. Given the small nature of MSMEs, the Govt’s move to also increase the annual turnover of the GST composition limit to 1.5 crore will also aid a tremendous number of SMEs. Sulekha expects the Govt. to unveil several such steps in the upcoming Feb 1st budget including a possible provision of value-added services like marketing fees, advertising and other such promotions to be considered under a progressively lower GST tax structure. The Govt. can also consider increasing online accounting and online tax calculation procedures for thousands of MSMEs who will benefit from an easy compliance regime,” says, SatyaPrabhakar, CEO & Founder of Sulekha.com
Supporting his argument, Avneet Singh Marwah, Director & CEO of Super Plastronics Pvt. Ltd, a Kodak brand Licensee, states, “In a move to promote domestic manufacturing, we are expecting FM to reduce customs duty on ‘open cell’ used in the manufacturing of LCD and LED television panels to 0 percent from the current five percent. As a lot of brands have started importing TVs from ASEAN countries under FTA, major brands have stopped manufacturing televisions in India. This has impacted the Make in India initiative to a larger extent, close to which one million TV units have already been imported this year under FTA.”
Well, the government is under intense pressure to address these demands and take on the opposition in the elections. On the flipside, it has a daunting task of keeping fiscal deficit in check, which will increase if all these demands are accepted. We wish that the FM will solve this dilemma, and give us a budget that will address both sides of the coin.