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Budgeting To Takeoff

The budget of 2015 to be presented in the February 2015 will decide the course of India, with high expectations from the budget along with the tagline of the Make In India will be the crux of the pace of the things to follow. The budget will assure that the economy will grow by 8% at least in the 2015-16 fiscal year and moreover India has to change the way it measures its economic activities to confirm with the international standards resulting in the huge upwards revisions to boost the growth figures and a bit of downward adjustment to the size of Asia’s third largest economies. The GDP growth is to be set at atleast 8% for the next fiscal year as the manufacturing sector has shown a good performance. Although the country’s GDP growth has picked up but the concern is on the slower growth in the tax collections and with the limited scope for boosting the tax revenues the other option is to step up the pace of the sales of the state assets and curb the spending to hit the government’s deficit reduction target in the coming fiscal year. Also that the steps will have to be taken to speeden up the sale of the shares in the cash rich oil companies which will eventually help the government to meet the fiscal deficit target of 3.6% of the GDP. From the business point of view the government along with the Reserve Bank Of India the data revisions have transformed India’s 2.1 trillion economy into one of the world’s fastest growing economies and now it is imperative to search the actual reliable indicator for these underlining current responsible for these activities.

 Even the Indian economy outgrew the Chinese economy by the December 2014 cloaking 7.5% year on year. The trio of the consumer, investor and the tax payer has very high expectations from the budget as the last year’s budget had led to the big cuts in the tax. The earnings over Rs 10 Lakhs a year were able to reduce annual tax liability by over Rs 20,000/-, and on the other hand the direct tax proposals including the tax payers had led to an estimated loss of Rs 22,000 crores to the exchequer, let us say for example for every benefit and the tax cut which are conceded will eventually impact the exchequer, even a mere deduction of Rs10, 000 crores translates into a loss of roughly Rs3, 000 crores to the exchequer.

 To quote another example the exempted limit of the of the senior citizen is above the 60 years is Rs50,000/- which is higher than the ordinary tax payer and so the revenue loss due to benefit is estimated to be 10% of the additional Rs50,000 exemption. The tax payer in the higher income brackets obviously wants the section 80 c limit to be hiked.

Analyzing the fundamentals India is overvalued in the equity markets. The key focus in the banking budget in 2015-16:-

Ø  The public sector unit banks to be recapitalized and the PSU banks actually requires huge capital to remain relevant in the business the capital infusion of about Rs 20,000 crores is expected in 2015-16 and as per the basal three implementation and the deterioting asset quality.
Ø  The disinvestment of the PSU as there is great expectation of the aggressive disinvestment of the PSUs like the BSNL and the LIC.
Ø  The monetary policy framework has to be redone, and the policy rates and the interest rates are to be finalized.
Ø  The reforms in the banking like to convert the cooperative banks into the full fledged banks thereby supporting the financial inclusion.

Ø  The forming of the sovereign fund because of the colossal financial needs of the infrastructure projects won’t be met by the banks or the non banking financial companies (NBFC) so this is the reason for the need to setup a sovereign fund for raising such recourses is felt.

 As the budget is to be presented with a tagline of – Make In India and will act as a catalyst to trigger in the correct direction so the focus will be on the tax and the expenditure measures like lowering of the taxes and enhancing the concessions for the maximum area and spending in the area of the productive activity and lesser disbursements which is also called the non development expenditure and all this is to be achieved by controlling the fiscal deficit and borrowing of the government so that the monetary policy remains unaffected while taking the above mentioned measures. Here the ratio of the fiscal deficit to the GDP has to be focused.

The focus is to be upon improving the delivery of the various social programmes. The disinvestment programme is to be on the prime agenda.

The budget is to enhance the scope under the section of the section 80 c and also enhance the limit for the tax exemption as it will help in increasing the consumer spending which is a bit on the lower side now. The announcement of the Make In India with 100 smart cities will be the key central point which will herald the push affecting the various sectors like – power, renewable energy, roads, warehousing and the real-estate as these sectors will receive the support through the higher allocation in the expenditure plans.

 Further more in the Make In India campaign the concessions will be on the area of the tax holiday, SEZ, limited duty cuts for the specific sectors and bringing in the private participation and no major changes in the tax structures is expected as the direct tax code and the goods and the service tax (GST) is not at the point of debate at the moment. So these are the times which will go down in the history as the launching pad of the India to a much greater highs.