The last two years were hit by the epidemic. After that, the urge to provide oxygen to the devastated economy due to the Russo-Ukraine war is now in front of him. Apart from this, the idea of capturing Delhi in a third phase by the 2024 Lok Sabha elections has to be given priority after being in the Center’s bill for two terms. However, before that, Union Finance Minister Nirmala Sitharaman will announce the last full budget of the present government today, February 1, in front of votes in 9 states and one union territory of the country this year.
When the economy of the whole world is troubled by the fear of recession, the mercury of hope and despair has started to rise as to which way Nirmala will walk to pull the economy of the country. The Russia-Ukraine war has added to the already strained state of the Covid-ravaged economy. Due to this, the price of various essential products including oil has increased in the world market. As a result, India’s fiscal deficit increased to 4.4 percent of GDP or $3,640 billion in the second quarter of the current fiscal year.
Then the main challenge in front of Nirmala, will she walk on the path of Jan Mohini and walk on the expected path to keep the vote bank happy or will she proceed on a more cautious path considering the real situation of the exchequer? In the current situation, there is some doubt whether the Union Budget to be presented today will be reform oriented or not. On the other hand, keeping in mind the poll market, most experts are willing to bet that it is going to be a crowd pleaser. Prime Minister Narendra Modi also said in an event on Tuesday, “This budget is going to be a bright spot for the troubled global economy. Hope the finance minister fulfills all expectations.”
A large section of economists claim that Indian economy’s base is strong enough to withstand the storm of recession compared to the world economy. Looking at it from that perspective, the budget for the financial year 2023-24 is expected to bring a number of surprises to boost the economy as well as provide relief to the masses, especially the middle class, which has been reeling under the shock of the Covid crisis and steep price hikes. From policy reforms to changes in the level of income tax or to put it simply, increasing the scope of income tax exemption, it is not surprising if the Union Finance Minister walks the path.
Since 2020, several factories have been closed due to the Corona epidemic for two consecutive years. A large number of people lost their jobs. The unemployment rate in rural areas has increased several times. Due to the bitter experience of the Corona period, a large part of the migrant workers did not return to the workplace. In the case of many people, that path has been blocked. In many cases the wages of the workers have fallen, or the prices of the goods have gone up, but wages have not increased accordingly. On the other hand, the monthly installment amount has become expensive as interest rates continue to rise.
From education, daily household expenses, home loan to paying the monthly installments of various types of loans, we have nothing left to spend. According to some economists, today Nirmala can try to meet the shortage by increasing the tax exemption limit. In particular, the exemption amount under Section 80 (C) of the Income Tax Act may be increased from the current Rs 1.5 lakh. Which can provide additional money in the hands of the common people by reducing the expenditure due to taxes. And if there is extra money in hand, only then will the tendency to spend to fulfill Sadh increase. The wheels of the economy will start turning.
Apart from this, the Institute of Chartered Accountants of India has proposed to provide tax exemption under Section 10(12A) of the Income Tax Act and make necessary amendments to Section 10(12B) of the Income Tax Act in respect of withdrawals by any customer of any organization from the National Pension Scheme (NPS).
A single tax scheme has been recommended from various quarters to simplify the tax system. Currently the taxpayer has to choose between the old tax system and the new tax system. It is claimed that the new tax system can be attractive if all kinds of exemptions are provided.
The Reserve Bank of India has raised interest rates by 2.25 per cent in a series of hikes to curb inflation in retail and wholesale prices of commodities. The aim was to absorb the cash flow from the economy. It had little room for economic growth. But, now that both retail and wholesale inflation are within the RBI’s comfort zone of 6 percent, the Centre’s emphasis on economic growth is a certainty. As a result of this, on the one hand, there will be an attempt to increase the supply of surplus money in the hands of the general public, as well as the expenditure in the infrastructure sector will be increased.
Nirmala knows well that the rural economy has to be pulled to strengthen the base of the domestic economy. And for that reason, the Center will emphasize on agricultural infrastructure systems that can be cultivated in all types of environments, says Satyam Sivam Sundaram, Partner (Government and Public Sector) at consultancy Ernst & Young India. Besides, before the 2024 Lok Sabha elections, the Center will want to win the hearts of the people through huge employment in the country. Mainly for that reason and to save the economy from recession, the finance minister will walk the path of increasing spending on various projects including infrastructure, said Deepti Deshpande, chief economist of rating agency CRISIL Limited.
Experts see great potential of being generous to the country’s industry in today’s budget. The corporate tax of this country is very low compared to other countries of the world. However, Sumit Singhania, partner of Deloitte India, believes that the finance minister has the opportunity to reduce it further. The Center may introduce Production Linked Incentive Scheme (PLI) in several sectors including automobiles to encourage the industry. Experts believe that it will be mentioned in the budget. How effective this project is in encouraging innovation and discovery is evident from the interest of multinationals like Samsung, Apple in manufacturing smartphones and smartphone components in India.