Finance minister Arun Jaitley has started the Budget making process on Monday. Tax exemption and middle income housing will remain the key focus in the upcoming Budget along with manufacturing stimulus, impetus on education, and expenditure reforms.
To bolster the investment sentiment in the country, the finance ministry is also likely to bring an amendment on the retroactive taxation in the Finance Bill, which has affected companies like Vodafone.
The middle class, which helped BJP attain its Mission 272 plus in the just-concluded general elections, is likely to be rewarded by the government. A senior finance ministry official told dna, "We have an elbow room for tax exemption by an additional Rs 20,000-30,000." A bonanza on housing is also likely to be announced. Urban development minister M Venkaiah Naidu told dna, "I will approach the finance minister with a proposal on reduction in home loan rates soon."
Amongst the various proposals, the finance ministry will look at incentivising the first time home buyers. It is here that the urban development ministry's proposal on the home loan rates will come into play.
The Budget, which is likely to be tabled in the first week of July, will be a full-year budget as eight more months are remaining to go in the current financial year.
Retroactive taxation was introduced by the former finance minister Pranab Mukherjee, affecting companies such as Vodafone, which has payables of about Rs 20,000 crore, including interest. "An amendment may be moved in the Finance Bill," said an official. Since the government has adequate strength in the Lok Sabha, it will not have any difficulty passing it.
On Sunday, a day before starting work on his first budget, Jaitley asserted that reviving growth, containing inflation and employment creation are the key priorities. Putting a word of caution though, he has also called for short-term disciplining for long-term benefits.
"We must move towards an era of fiscal discipline where we can reduce the fiscal deficit, contain inflation and improve upon our growth rates. Short-term disciplining till we reverse the present trend will give us long term benefits," said finance minister Arun Jaitley in his blog a day before starting work on his first Budget.
Jaitley has also called for an out-of-the-box thinking as far as price stability and growth are concerned. "Price stability and growth are inter-twined but may require a different strategy," Jaitley said on his blog.
Meanwhile, a series of changes seem to be going on in the underbelly of the finance ministry as far as the macro-economic management is concerned. A senior official in the ministry of finance said change in the approach of the government will be reflected in the Budget.
"Over the last few years, the government had been resorting to Plan Expenditure cut to control the fiscal deficit. This is likely to see a reversal and henceforth funding for important development work will not be compromised. The Budget may also lay foundation of some expenditure reforms that the government is likely to undertake. The fiscal consolidation will continue and the strengthening rupee will induce savings on the oil/fertiliser subsidy bill front," said the official.
Meanwhile, the North Block will be out of bounds for media as the annual ritual of Budget making begins. It is a highly covert exercise and in the last four days, all those involved in the Budget making process, are not allowed to leave the finance ministry until the Budget day.