While the Narendra Modi-led BJP government is all set to present its maiden budget on July 10, the common people and industry have high expectations from the finance minister, especially when it comes to fulfill the promise of 'acche din aane wale hain'.
In the forthcoming budget, besides maintaining trend of fiscal consolidation, it is expected that the government would lay out policy reform agenda. In this regard, Zee Research Group (ZRG) lists 10 key recommendations which have a high probability of being announced in the budget:
A deadline for the implementation of GST and DTC to be announced: It is expected that the finance minister would lay down a very strong emphasis on the implementation of GST (Goods and Services Tax) along with a strict timeline. There is an urgent need to ramp up India’s tax to GDP, which at 11% is one of the lowest in Asia. As per the NCAER study, a complete implementation of the GST could lift GDP growth by 0.9-1.7 percentage points for all future years.
Disinvestment target to be revised upwards: With buoyant equity markets and SEBI pushing for a minimum 25% public holding in PSUs, there are high chances that government would set an aggressive target for disinvestment in FY15. As per the interim budget, the total proceeds from disinvestment was estimated at Rs 51,925 crore. It is expected that the target would be more than Rs 60,000 crore.
Ease import duty on gold by 2%: Import duty on gold might be reduced from 10% to 8%. The move is needed as local jewelers run out of inventory. However, this will likely widen the current account deficit levels from 1.7% last year. The move would make the exchequer poorer by Rs 2,000 crore.
Hike excise duty on cigarettes: There could be substantial hike in excise duty on cigarettes as the health minister has shown concerns on tobacco consumption in India. The move to raise excise duty on cigarettes by Rs 2 per stick can add Rs 3,800 crore to the government's revenue.
Personal income tax exemption limit to be enhanced: An upward revision in the income tax exemption limit would be a step forward towards direct tax code (DTC). The exemption limit can be enhanced from Rs 2 to 3-4 lakhs. Further, 80C investment limit might be increased from Rs 1 lakh to 2 lakh. If the 80C limit is increased to Rs 2 lakh, the loss of exchequer would increase by Rs 62,000 crore.
Higher allocations to education, health, defence: A feature of the past few budgets has been the squeeze in capital spends. This budget will be different in that it will heavily demonstrate the government’s commitment in pushing for infra spending. The government might announce new flagship mega-infrastructure projects with time bound deadlines—Delhi Mumbai industrial corridor, Diamond quadrilateral for railways, broadband highways, smart cities.
More FDI reforms on the anvil: It is expected that government may increase FDI limits in defence and insurance to 51 per cent. Relaxation of FDI norms in sector such as defence would drive job creation.
Removing retrospective tax legislation: The government could formulate clear policies to do away with norms such as retrospective taxation which can address the concerns of foreign investors. This will provide positive boost to the business sentiments and will make India’s tax environment transparent.
Some consolidation in centrally sponsored schemes (CSS) may be seen: A reorientation of the MGNREGA scheme towards focused capacity creating measures like rural roadways and irrigation projects. Interestingly, the outgoing government announced that the number of CSS would be consolidated to 66 in FY15 from 142 in FY14 to improve monitoring and efficiency.
Rationalise fuel subsidy: The budget is likely to contain measures to address high subsidies particularly fuel subsidies. It is expected that the government might provide a clear roadmap on cutting down these subsidies over the next few years. Bold announcements on price rationalisation of diesel, LPG, and even kerosene can be made.
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