The country’s budget will be presented amidst economic slowdown, how will the government overcome these challenges
In many ways, this budget will be very important for the government. Because this budget is presented at a time when the country is going through a slow economy.
There are a few days left for the Budget 2020 to come. The preparation of the budget from the government is in full swing. Everyone’s eyes are on the budget presented. On 1 February, Union Finance Minister Nirmala Sitharaman will present the budget. This will be the second budget of Nirmala Sitharaman. But in many ways, this budget will be very important for the government.
Because this budget is presented at a time when the country’s slow economy, GDP at an almost 11-year low, negative demand, a negative estimate of inflation rate in December, employment data is disappointing. In such a situation, this budget is going to be challenging for the government.
GST makes a Dent for Fiscal Deficit
The goal with which the government has launched GST. It still does not appear to be complete in terms of earnings. Because the government did not earn as much as it had expected from the GST. GST earnings are well behind the target. It has also affected the treasury. The fiscal deficit is increasing due to all these reasons. Despite the government’s efforts, it is exceeding the target of fixed fiscal deficit and keeping it within that target in this budget is a big challenge.
The government has to present the budget at a time which is slowing down in the country. The condition of the industry ranging from employment is very worrying. In fact, the biggest reason for the economic slowdown is the decrease in demand. In such a situation, the government will try its best in the budget to take such measures so that the demand can be accelerated.
Corporate Rate Tax Cut Implications om Government Treasury
To make the corporate world happy, the finance minister had reduced the corporate tax from 30 percent to 22 percent after the last budget. But due to this decision of the government, every year there has been an additional burden of 1.5 lakh crore rupees on the government treasury. Therefore, the government will also have to consider this in the budget.
Growth rate at the lowest level
Due to the economic slowdown in the country, the growth rate has reached a minimum level of 6 years. Due to which the biggest challenge before the government is to bring it back on track. The treasury of the government is constantly becoming empty. The government is again expecting 45 thousand crores of help from the Reserve Bank. In such a situation, when the treasury is empty, it has to be seen how the government is able to make every front happy in this budget.
The government of India may take a bold step in reducing import duty on raw materials like rock phosphate and sulfur which is used for manufacturing of DAP (Diammonium phosphate) would benefit and encourage local production in India and reduction in import bill, according to sources.
Reduction in GST on Auto LPG, as Liquified Petroleum Gas is used as fuel in automobiles, and is also considered as one of the cleanest alternative fuels with a Global Warming Potential of ‘zero’ which is at present is in the slab of 18 percent GST.
The agricultural scenario in villages of Rural India is currently in a Difficult junction and this has severely affected the agri-incomes. Additionally, it may surprise a huge hike in budgetary support for farm loans and credit, irrigation and farm infrastructure development schemes and the income support scheme – PM-KISAN. Union Budget 2020 may unveil new initiatives like the implementation of the next level of Direct Benefit Transfer and integration with a couple of various schemes like the Soil Health Card scheme. With the Union Budget just around the corner, expectations are high that the government will address agrarian distress, which will better farm incomes.
Paint manufacturers are looking at the Government of India’s next step to boost consumer sentiments and encourage demand in the upcoming Union budget, instead of any consideration of further tax cut for the sector. In the initial steps of GST implementation, around 28 percent GST was taxed on paints, but with a request from the industry pioneers, the government had slashed down the rate by 10 percent to 18 percent in July 2018.
Real Estate Industry:
The Realty Sector is having its eyes on to the India Union Budget 2020 with huge hopes in a bid to get a couple of reliefs from liquidity crunch and crisis. Homebuyers are also expecting some major relaxations that would ease their hardship in times of recession. As per the data in 2017, real estate accounted for 6 to 7 percent of India’s Gross Domestic Product (GDP). Now as per the forecast, Real Estate Industry is expected to contribute to around 13 percent to India’s GDP by 2025 and is seen becoming the 3rd largest across the globe at USD 1 trillion by 2030.
Abolishment or Relaxation of dividend distribution tax. The tax cut would benefit companies having more money in their kitty for capital expenditure and project investment which will encourage growth and boost jobs and employment on a massive scale.
Pharma Industry and Health Care Sector:
The Indian pharmaceutical industry is hoping and requesting the government to undo the tax benefit offered on research and development expenditure which will encourage competitiveness and innovation. The industry is also under the expectations that the government will announce incentives and incentives in the budget to motivate setting up bulk drug manufacturing units within the country and also boost spending on healthcare.
India’s Fast Moving Consumer Goods (FMCG) companies is predicting a revival in demand, which will be totally relied on what stimulus package will be announced in the forthcoming Budget. Due to the announcement of the stimulus package, it will lead to more money in the hands of the common man to spend that would be announced in various alternative ways like lower income tax rate for Individuals, Employment creation and direct benefits for rural consumers.
Industry experts are predicting that there will be Labour and Capital Reforms which will boost growth and make India’s economy more efficient.
The insurance sector is looking for a decent hike in tax exemption for particular policies brought by its clients. This, said insurers, would help lift up sales and will also make the product more lucrative.
On the other hand, Life Insurers are also looking for a special tax exemption limit for pension products and term products. Right now, only the National Pension System (NPS) has this provision. General insurance companies are seeking tax incentives for policyholders are purchasing insurance for the property. Until now no such tax exemption or relaxation is available for non-life products except health insurance cover.