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Most years, in January markets get jittery in anticipation of one annual event – Union Budget. The finance minister has been creating quite a build-up since last month promising a Budget like “never before”. While the details of the contents will be spilt only on the big day, there sure are a few never before instances in the semantics this year. For starters, the traditional halwa ceremony ten days before budget and before commencing the printing shall not happen. Neither are the budget papers being printed for the first time in over 100 years!
As to the policies, it is going to be a tight tricky rope for the finance ministry to walk. The government coffers are running pretty light. On the other hand, enough and more citizens have suffered the punishing brunt of the crippling economic crisis that we are only now beginning to recover from. But from the industry chatter, there are a few themes that do seem to emerge.
1. Agricultural reform
With the intent of eliminating the middle man and more corporate participation, the government introduced three bills as part of their promise to double farm income by 2022. You would have to be living under a rock to be unaware of the farmer resistance and unrest over them. With this budget, it is expected that the government will come out with a different route to farm reforms which would be more amenable to the main stakeholders. This could involve more government spending in the areas of storage or even logistics.
2. Covid cess
One of the proposals that the government is said to have tested with a few committees is the idea of a Covid cess. The pandemic has severely tested the government’s fiscal tensile strength. Even now with the need to fund a widespread vaccination drive, reasons for government spending just don’t seem to reduce. In this background, it is a possibility that a covid cess could be added either in direct taxation (impacting a small salaried chunk of the population) or in GST to tax consumption further.
3. Infrastructure spending
John Maynard Keynes gave the world a lesson to remember when he helped bring the US out of their Great Depression slump by advocating increased government spending and lower taxation. The former is now inextricably linked to a phase of economic recovery, which we find ourselves in. Hence, most industry watchers believe that government spending will play a key role in this budget. However, the proof of this pudding will be much more important. For even while the government announced a huge Rs. 1 Lakh Crore stimulus in the middle of the pandemic last year, it amounted to little actual spending. Thus, this parameter will be keenly watched.
4. New age provisions in taxation
Advocated by Keynes and voted for by popular demand, lower taxation is an evergreen crowd pleaser. However, given the state of the treasury it doesn’t seem like a very practical possibility this time if the sheets have to be balanced. But there have now been whispers of a smart workaround to this. With wfh becoming the rallying phrase of 2020, some believe that this budget could introduce a provision for not taxing spends to make homes more conducive for working. Mind you, this is still a theory floating in the air and only the big day will tell us whether it lands or not.
5. Make in India
One lesson that was globally concluded in 2020 was to diversify manufacturing and not depend solely on one location, namely China. While imbibing the lesson for itself to become atmanirbhar, India also looked at it as an opportunity to attract more production and become a more sizeable factory to the world. One hindrance to this dream oft cited is the red tape and bureaucracy around getting things done, apart from the higher levels of taxation. While some steps were taken to mollify this impression, it is expected that the budget will be more on those lines of boosting local manufacturing and swooping on this opportunity.
Now that the countdown to the budget is truly here, theories abound as to what could unfold. Are there any that we have missed which you feel is bound to come in? Let us know in the comments below.
