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  • 4 takeaways from Arun Jaitley’s speeches about the Budget

    The new year has not even started, but all eyes have turned to the Union Budget already. This is especially since the Budget will be announced on February 1st. It used to be on the last working day of the month.

    Every speech by Finance Minister Arun Jaitley is not subject to great scrutiny. They could hold hints on the upcoming Union Budget. Here are four things he said that give hints about the Budget :

  • Lower Direct taxes:

    What he said: We have seen, post-1991, the entire course of economy altering itself. What you need is a broader base of the economy, for which you need a lower level of taxation. You need to manufacture products and provide services which are more competitive in character and therefore your taxes have to be globally compatible.
    What it could mean: The FM had already announced a roadmap to lower corporate taxes in the last year’s Budget. The speech only sets the same tone for this year’s Budget too.

  • Optimal capitalisation of banks:

    What he said: The current Financial Year is not a conventional year as many major reformative decisions have been taken during the year. There is a need for out of box thinking as a series of steps are required about what the Government can do and what the banks can do.
    What it could mean: The government could announce a capitalisation package for banks. However, it could be lower than what banks have asked for. Instead, the government may ask banks to sell government stake to raise money. This is especially since liquidity increased in banks post the demonetization of the 500 and 1,000-rupee notes.

  • Need to raise passenger fares to improve services :

    What he said: The world over only those services have succeeded where the financial model is the consumers must pay for services they receive. We turned this whole theory upside down by self-imposed indiscipline that populism requires consumers do not pay for the services they receive.
    What it could mean: For a long time, the Railways was used as a platform for announcing populist measures. Prices have been on the lower side for a long time even though the ministry has been running losses. This could change in the upcoming Budget. The government may choose to announce a price hike or it could take away some tax benefits.

  • Higher government spending:

    What he said: India aspires to become a developed economy from a developing economy and a 7- 7.5% GDP growth does not satisfy its requirements. Therefore, spending more and now is the focus. Infrastructure spending certainly needs a booster… There is a long-term potential of more resources getting into the system and that is going to be the top priority. Therefore, the areas where we were lacking, whether in terms of encouraging investment by the private sector and so on, I think these are going to be the areas where the budget should concentrate on.
    What it could mean: This one is quite expected. The government wants to increase investments in the country, especially in the infrastructure sector. This is because the lack of investments was said to be one of the key reasons behind India’s 5% economic growth. However, the problem was that the government ran a high fiscal deficit—the amount by which it spent more than it earned. Spending more while reducing the deficit is a difficult task. However, with the demonetization, the government could expect a higher tax revenue. This gives it the bandwidth to spend more without worrying about the fiscal deficit.

    • 5 announcements that can be expected in the Budget Read more

    • How Narendra Modi's demonetisation move made Arun Jaitley's budget task a trial by fire Read more

  • Rs 22,915 crore

    In his last Union Budget, the FM had announced a plan to infuse Rs 25,000 crore in the 13 government-owned banks. So far, it’s allocated 92% of this amount, i.e., Rs 22,915 crore, as per a Business Standard report. The government is yet to decide whether it should give the remaining amount in this fiscal year. Banks need a total capital infusion of Rs 1.8 lakh crore. Of this, the government promised to pay Rs 70,000 crore over a span of 4 years.