Finance Minister Arun Jaitley will present his third Union Budget in Parliament today. The challenge before the government is in keeping both farmers and the industry happy at a time when the global economy is slowing down.
As recently as Sunday, Prime Minister Narendra Modi said he was hoping to help farmers, who are facing severe agriculture distress, double their income by 2022. At the same time, the biggest push by the Centre has been to increase the ease of doing business in the country and keep the economy afloat amid a troubled global climate. Maintaining the balance between increased public spending and boosting growth will be the key aims of the Budget this year. Here are some things you can expect:
Fiscal targets and GDP
With the Economic Survey predicting a modest 7-7.75% growth in GDP over the next year, the government might keep its targets at a similar level. It is also expected to maintain its fiscal deficit target at 3.5%. Funds are needed for the Seventh Pay Commission, to develop infrastructure and for the recapitalisation of banks, but going too far beyond the fiscal deficit targets may not please ratings agencies and foreign investors. A critical balancing act lies ahead of Jaitley.
The rural sector
The government will need to make serious room for the rural sector in this year's budget. Two years of deficient rains have left farmers struggling. They might announce additional spending on rural infrastructure through a new scheme, while also boosting old ones such as the Mahatma Gandhi National Rural Employment Guarantee Act. The government is expected to expand crop insurance and boost irrigation outlays.
Personal tax slabs
The Economic Survey, released on Friday, suggested that the government keep the tax slabs unchanged. It might, however, make some changes to the options for personal tax exemptions to boost savings.
Higher taxes for the super-rich
The Finance Ministry is likely to raise taxes for those earning more than Rs 1 crore. The Economic Survey hinted at this. At present, the government levies a 12% surcharge on the tax paid by this group.
The GST issue
Jaitley might increase service tax from 14.5% to up to 18%, to come closer to the neutral rate under the proposed Goods and Services Tax Bill. The government has missed its April 1 deadline to implement the GST, with the Bill still pending in Parliament. Some are also predicting a new cess, similar to the Swachh Bharat cess, to fund other big-ticket government projects such as Start-Up India.
Seventh Pay Commission
With the Seventh Pay Commission expected to increase government salaries significantly this year, the ministry expects that this will boost domestic consumption at a time when global demand is weak. The government is likely to spend Rs 1.02 lakh crore on the Seventh Pay Commission reforms.
Corporate taxes
The ministry might announce measures in keeping with its plan to bring down corporate taxes from 30% to 25%. This might be done while also removing exemptions or tax cuts for businesses.
Oil prices
The government might reintroduce customs duty on crude, petrol and diesel, with global oil prices falling sharply this year. It had removed the duty in 2011, when oil prices had risen to more than $100 a barrel.
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