24 Jan 2017 18:48 IST

Budget 2017 will be about three Cs

Post demonetisation, certainty, compliance, and confidence could be the budget’s outlook

Budget 2017 is new in many ways. For starters, it is not being announced at the end of February, like always. Instead, it is being presented at the beginning of the month, along with the railway budget. It is also when the government, after having demonetised the ₹500 and ₹1,000 rupee notes, could design policies that can help consumer sector businesses, such as FMCG and agriculture, which have been the most-affected in the economy.

While a number of bold steps have been taken by the government in past year, the focus will be on three verticals this year — certainty, compliance, and confidence.

Certainty

To begin with, certainty in the economy will depend on the implementation of the Goods and Services Tax (GST), which has been a moving target for the government. Besides this, GAAR or General anti-avoidance rule (for which guidelines are still expected), multilateral and bilateral collaborations with other countries, and tweaks in income tax slabs will further shape investors’ attitudes towards the economy.

The budget notification in 2016 to allow foreign investors to market agricultural produce did not take shape, and is expected to be this year’s highlight, as it will give the agriculture sector a huge boost.

As for taxes on gold, alcohol and tobacco, which have remained historically high, the government may increase import duties to make them less attractive, hence promoting the Make in India initiative.

Compliance

With GST on the anvil, compliance in terms of reforms has been taking place in the economy, mainly to push transparency by targeting black money and improving tax to NDP ratio. A major focus will also be on the creation of a digital economy by encouraging digital infrastructure, especially in agriculture, a sector that contributes 13.7 per cent to the GDP and employs 50 per cent of the workforce.

Due to demonetisation in November 2016, many farmers were unable to purchase seeds, because of which large areas of land were left unsown. By ensuring proper facilities, introducing multiple modes of cashless transaction and improving infrastructure, the Union Budget will have to ensure that small farmers benefit from government spending.

Confidence

Finally, confidence among investors in the economy will continue to be the focus, with PM Modi’s emphasis on ‘Make In India’ and Start-Up India initiatives. Investment in digital and cyber security infrastructure will ensure that all online payments are completely secure, and more citizens are financially included in the economy.

Lastly, announcements made by the government to encourage non-cash transaction in retail are expected to increase.

While the World Bank has pegged India’s growth rate at 7 per cent due to demonetisation, it remains to be seen if growth-oriented budget can push the Indian economy toward double digits, in the New Year.

Videos

Growth vs Value Investing

'Children are having a bigger say in family purchases'

'Recruiters want students with good domain knowledge'

Recommended for you