Recently, the Indian economy is witnessing low inflation, continued global trade tensions, weak industrial production, and sluggish growth. According to a report, there are a slowdown in domestic demand in both, urban and rural areas. This has, in turn, resulted in low industrial growth. A Kotak Strategy Report on jobs data states that there is a rise in the unemployment rate and a decline in casual labour. To address all these glaring issues, the government had suggested several corrective measures in the interim budget in 2019. Click here to know more about the Interim Budget 2019-20. With the new cabinet, and our new Finance Minister, Smt. Nirmala Sitharaman, the following reforms can be expected from the upcoming budget:
Here are the top 3 reforms, you can expect from the 2019-20 budget:
For increasing household consumption and savings
There was a major direct tax reform in this year’s interim budget. The ‘Zero’ percent tax rebate was introduced for income up to Rs.5 Lakh. This was mainly done for improving household consumption and savings pattern. In the upcoming budget, the tax slabs are likely to move upwards. The investment limit under section 80C and 80D, and the deduction of housing loan interest might increase. This will help in encouraging household savings and investments. Click here to read about the consumption stimulus efforts, in a previous budget.
Generating newer employment avenues
There is a pressing need for educational and job market reforms in the Indian economy. According to a Kotak report, around 36% of graduates and above-level professionals are unemployed. Creating of new infrastructure development projects can help in generating new employment avenues. Further, improvement in skill-based education can also help in enriching human capital in our country. Additional fiscal incentives can be provided to high employment generating sectors, like tourism, gems, and jewelry, textiles, food processing, etc.
For maintaining fiscal balance
To maintain fiscal discipline, new sources of non-tax revenues should be explored. One of the ways for enhancing non-tax revenue is through expediting disinvestments. Both, government and quasi-government borrowings must be curtailed. If the fiscal discipline is not maintained, the interest rates might remain high. This can have a negative impact on investor sentiments. Click here to reads about the efforts to create a fiscal stimulus that was taken during the 2017-18 budget.
One related number : 10%
India Inc. is expecting a reduction in the current DDT (Dividend Distribution Tax) from 20% to 10%, in the upcoming union budget. This tax is imposed on Indian companies on the dividend paid to their investors. Therefore, a lower DDT would mean higher in-hand returns to investors who have opted for a dividend option.
A few links for further reading
A Budget for a New India
I compliment the Hon’ble Finance Minister Smt. Nirmala Sitharaman for a wonderful maiden budget. There are many themes in this budget which resonate with a new India. It is a budget which puts out the theme for the next 4-6 years about our future as a country in the global comity of nations. I commend the finance minister for continuing to maintain fiscal discipline by targeting fiscal deficit at 3.3% of the GDP. I am also very enthused by the recognition of the fact that global interest rates and liquidity are very conducive, and it is time for India to carefully but selectively leverage global liquidity for funding our growth aspirations. This is something, if well done, can make a significant difference to the domestic interest rate scenario.
Union Budget 2019 – What is in it for the investors and the industry?
In the run-up to the Union Budget presentation on July 5, the Stock Exchange was trading at less than a percentage change since the previous day. Investors have been keen on finding out how the government plans to increase consumer demand and boost revenues.
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