It’s that time of the year when all of us draw up wishlists…and no, I do not mean Christmas, but the Union Budget. As D-day comes hither, this time earlier by a month, hopes are up across constituencies in the country — the thinkers and doers, the aamjanta and corporates alike. In the aftermath of the demonetisation shock, everyone expects the Budget to be revolutionary, a sort of an instant pill that will boost the economy on all fronts.
Before I present my own wishlist, the one thing this Budget must, above all, be,is accountable and transparent. No more the hiding behind numbers, allocations and subsidies. Clear, defined action plans, especially on demonetisation and the GST will be key. Lack of information on the government’s (changing) intents behind demonetisation — from black money, to a cashless economy, to a ‘less cash’ economy — has only made matters worse. Even if the note ban was a bitter pill for better times, it’s time the government takes decisions to restore economic momentum.
One reason lies in the numbers. Almost unilaterally, major development agencies, including the International Monetary Fund (IMF), the World Bank and a smattering of ratings firms have downgraded India’s growth calls for 2016-17 to 6.6-6.8% (and that does not consider the demonetisationdays, yet!). Thus, the onus will be on the FM to turn the apparent benefits of the note ban — increased tax collections, rising deposits at banks and India’s move to a digital economy — to his and our benefit.
And now yes, to the wishlist. While I don’t expect the FM to literally put money, in every Indian’s pocket (bank account), the below will suffice:
Taxes – With the government’s coffers apparently swelling post demonetisation, relaxations in tax slabs top the list of expectations. It would help if the FM follows the recommendations of the DTC (Direct Tax Code) and widen tax slabs. Besides, hiking exemption limits in key areas such as Section 80 (C), home loan interest, leave encashment limits, house rent allowances, etc will also help households retain capital and some of it may spur consumption that has severely stalled post the note ban. Moreover, tax sops will also help money stowed away in savings accounts move into financial assets, i.e. speed up the transition of money into investment and gradually wealth for the Indian masses.
GST — TheGoods & Services Tax (GST) is a single tax. True. Yet, while differences with the states have been ironed out, all common man cares for is how different his final bill will be. With a July rollout eyed, the Budget will be an apt time to delineate the rates for various classes of goods — consumer goods, food items, luxury goods — thus making the math easier. Greater clarity on the cess component is also eyed.
There is one thing to watch out for, however, as the FM may attempt a trade-off: while he might ease personal income tax rates, he might offset the impact of such a move by categorizing tax rates under the GST regime in such a way that state coffers stay intact. Thus, it will be a zero-sum game for the aamaadmias whatever he saves on income tax, he would eventually shell out as indirect taxes (India, as opposed to most developed nations, has a skewed direct to indirect tax ratio of roughly 35:65).
Education and healthcare: These are areas where I would like some (positive) surprises beyond the usual Yojanas and allocations. For one, given the huge rise in deposits with banks, the FM could pave the way for credible interest subventions, or some sort of a federal aid programme that targets meritorious students across disciplines — humanities, management, science, etc — thereby bringing down the fee bill by at least 40-50% and boosting enrollment figures for higher education. Such a move will also be in line with the government’s Skill India initiative. Similarly, in terms of healthcare, a key hope is an increase in the limit on annual medical reimbursements for the salaried class and a rise in deduction towards payment of health insurance premiums. Lower tax rates on medical devices under the GST regime could also help.
Let us wait and watch…