How Budget 2015 Could Change India

Finance Minister Arun Jaitley’s last budget was delivered within two months of assuming office. This time around, he is expected to deliver a budget that is widely expected to change the course of India’s economic history.

Also read: Union Budget

Here are five things that need to be done in the budget to change India:

Better Tax Regime Is Good For Business:

India’s tax regime has been characterized as complicated, short-sighted and fickle. Tax rates change and new taxes are levied almost every new year. This year, the finance minister must simplify the tax code and lay down a broad framework of tax policies that will endure for 5-10 years. This should support the government in its endeavour to push India up in the global ‘Ease of Doing Business’ ranking. India is ranked 142. Prime Minister Narendra Modi has announced that he wants to push that up to 50.

• How this changes India: If India rises up in the “Ease of doing business ranking”, foreign investors would bring in the capital needed to boost India’s infrastructure.

Investment In Infrastructure And Implementation Of GST:

The government expenditure must be directed towards long-term growth-generating avenues such as roads, railways, and ports development and affordable housing. Government expects investment to the tune of $250bn in the power sector. These must be directed towards renewable energy projects and away from imported coal-based ones. If India can make it easy for people, goods and services to move around, it would be the single most transformational change. The implementation of a single Goods and Services Tax across the country could help immensely by integrating the market.\

• How this changes India: When India becomes a single integrated market, goods move freely. Better infrastructure could mean ease of movement for people and goods. That enhances ability of producers to take goods to markets quickly. It is needed to rein in inflation caused due to supply side constraints.

Also read: Highlights of Union Budget 2019

Disinvestment To Raise Funds For The Government:

There is a potential of raising another Rs.60,000 crore from disinvestment this year, according to CII, an industry body. Another Rs.2,00,000 crore is sitting idle on PSU balance sheets. Over Rs.22,000 crore is expected from the recent Coal India stake sale. These, if harnessed, would be giant steps towards achieving the fiscal deficit target and finance long pending growth programs. The finance minister must outline a firm target and a clear schedule for disinvestment. The government needs to focus on being an enabler than a player in the market. Bit by bit, ownership in businesses should be cut so that it can focus on administration.

• How this changes India: The government machinery is too involved in the day-to-day affairs of public sector companies. With a wider shareholding for PSUs due to disinvestment, they could get efficient. At the same time, government will realize the much needed funds from disinvestments.

Personal Finance And Consumption Spending:

A large workforce offers the potential for high consumption spending. However, a high-tax regime takes away a large chunk of income and tarnishes this potential. Thus, tax rates must be lowered to boost consumption expenditure. This will subsequently lead to high corporate earnings. In turn, this will spawn more employment and will ultimately lead to more taxpayers and higher tax revenues. The Finance Minister may increase the tax exemption limit. He may also rejig tax slabs and cut rates across slabs.

• How this changes India: Any rationalization of tax rates means more money to consumers. This could boost spending and enhance productivity in India. In a complex world that is facing a slowdown, a buoyant domestic demand driven market could sustain long-term economic growth.

Boost To Manufacturing:

Minimum Alternate Tax or MAT is a mechanism that prevents companies from exploiting inconsistencies between the Income Tax Act and the Companies Act to avoid the tax. It asks companies to pay tax at 18.5% rate if they report profits according to the Companies Act but not the IT Act. Reduction of MAT rate for manufacturing and SEZ entities would attract domestic and foreign entities to the manufacturing space. Media reports suggest that tax holiday to such entities is being mulled by the finance minister.

• How this changes India: It could give a fresh impetus to the ‘Make in India’ campaign. If manufacturing gets a boost, it could create new jobs that could keep young Indians busy.

Also read: Union Budget 2019 vs. 2018