Interim Budget to Signify BJP’s Intent

The interim budget will be the sixth budget to be presented by Finance Minister Nirmala Sitaraman, writes Venkatachari Jagannathan

The common thread that runs through the budgets presented by the NDA government under Prime Minister Narendra Modi during the last 10 years has been a balancing act between growth and social welfare, said a top economist at Anand Rathi Shares and Stock Brokers. “Over the past five years the focus area of the budget has been making India self- sufficient (Atmanirbhar) and reducing dependence on other countries in respect of key critical areas.

For this manufacturing has been given significant focus,” Sujan Hajra, Chief Economist and Executive Director told IANS in an interview. According to him, in the past 10 years of Modi rule, the Union budgets have focused on the effective implementation of the social welfare schemes — farmers, poor sections of the society, women and child welfare schemes received major upgrades throughout the budgets.

“On the other hand investment in infra and ease of doing business and effective implantation of technology for desired outcomes remained the key focus. Catering to the needs of a large section of society while playing to the gallery and at the same time focusing on growth and development with visionary ideas have been the hallmark of Modi budgets,” Hajra added. Queried about the upcoming 10th budget of the Modi-led BJP government, he said though this is going to be an interim budget and the full budget of FY25 will be presented only after a new government takes over post the general elections, it will be of significance as it reiterates the intent of the BJP if it returns to power. “The interim budget will be the sixth budget to be presented by Finance Minister Nirmala Sitaraman starting 2019 when the Modi government returned to power for a second time. During her tenure as Finance Minister India withstood many challenges and witnessed continued reforms amid the Covid-19 pandemic,” Hajra said.

The budget is expected to continue its weight on capex. As India appears to be in the most advantageous position to take advantage of China+1 opportunity that the corporates are intending, India is expected to improve the infrastructure status in the country and thus attract investments, Hajra said. “Since income-tax and the revenue collection growth remain strong owing to the robust economic performance and also higher collections of goods and services tax (GST), the government may find space to increase the tax slab levels,” he remarked. According to him, the new tax regime is viewed as disincentivising savings as those investments available in the old tax regime do not apply to those who opted for the new tax regime. In order to incentivise savings and also making the new tax regime attractive certain savings and payments can be allowed towards deductions. Looking at the past five years, the Union budgets focused on making India self-sufficient and reducing dependence on other countries in respect of key critical areas. For this manufacturing has been given significant focus, Hajra said.

The corporate tax cut to 22 per cent for existing companies and 15 per cent for manufacturing firms in 2019 has been a significant step. Post that, most of the measures have been implemented towards ease of doing business. Moreover post pandemic production linked incentive (PLI) schemes had been rolled out for different sectors to give a boost to manufacturing. India has emerged as the second largest manufacturer of mobile phone devices and a potential semiconductor hub. Continuing, Hajra said one of the key focus areas of the past budgets had been the focus on easing foreign direct investment (FDI) norms. FDI under the automatic route has been allowed for most of the sectors. Except in critical areas,, FDI has been allowed anywhere from 74% to 100% in various sectors. India is expecting $100 billion FDI in the coming years despite the recent slowdown. “Self-reliance in defence equipment manufacturing received a major boost. In India which still depends on foreign technology and equipment for warfare, indigenous manufacturing received attention with defence corridors given prominence. Defence production crossed Rs.1 lakh crore for the first time and exports were Rs.16,000 crore covering 85 countries,” Hajra said. The successful implementation of the Jan Dhan Yojana and Aadhar linking enabled the information technology (IT) revolution in the way of doing business and transactions. This sector received top priority in all budget schemes becoming the enabler in the implementation of various schemes including the direct benefit transfer.

As regards infrastructure development, the launch of the National Infrastructure Pipeline and the Prime Minister Gati Shakti Yojana involving investments of over Rs.150 lakh crores have received budgetary support with the Central government being the major investment driver. While the private sector slowed down, the government stepped in keeping the momentum in the sector upbeat. Roads, railways and warehousing and logistics have been the key focus areas, Hajra pointed out. Asked about the Central government carrying out midway corrections after presentation of the budget Hajra said: “During the 2019 (July – 2019) budget a few of the proposals were viewed as unfriendly for the markets like: the proposal to raise public shareholdings to 35 per cent; proposal of 20 per cent tax on share buyback; increase in surcharge on income-tax of foreign portfolio investment (FPI).” The markets, which were rejoicing the Modi government’s return to power, fell immediately and up to the third week of August 2019 the markets were down by 10 per cent. “However, later in August, the Finance Minister announced a roll-back of an increase in surcharge on the income tax outgo of FPIs. Also currently the minimum public shareholding is 25 per cent for listed companies,” Hajra recalled.

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