24 Feb 2016 21:51 IST

Create the right environment for investors

The Budget must encourage private sector participation, and enable huge investments in skill development

The Union Budget is expected to be very aggressive this year to match the rapid momentum that the Make in India initiative hopes to create. The budget is widely expected to increase the income-tax exemption limit, considering the falling deposit rates and rising inflation that have hit the personal income-tax payers.

The tax exemption is expected to be raised so it can leave more savings in the hands of individuals. The taxation of house property should be overlooked this year. This follows the most basic principle of economics, “with rise in income, people usually increase their consumption, and increased consumption leads to higher economic growth”.

Also anticipated from this budget is robust investment in the infrastructure sector. Compared to last year, allocation for this sector is expected to rise to ₹1 lakh crore from ₹70,000 crore. The development of rural infrastructure is also hoped for, as also an increase in the R&D sector. Last year, the amount sanctioned to this sector was ₹150 crore. This is expected to increase with advancements in the technological and medical fields.

The “Start-up India” campaign was launched with much fanfare and an amount of ₹50-80 crore is expected to go into this sector to facilitate the creation of effective and efficient start-ups that can help contribute to GDP growth.

The renewables sector is also expected to get a big fund infusion. Sanctioned ₹75 crore last year, the industry will likely be allocated at least ₹200 crore for solar, wind and hydro electricity as well as electric car production, which was introduced last year.

The prices of cigarettes and tobacco are expected to rise with the higher excise duty on these items. Talking about duties and tax exemptions we should not overlook subsidies. The expected subsidies for year 2017 should be 1.55 per cent of GDP as compared to 1.7 per cent last year. This decline is on account of the falling global oil prices.

This year the expectation on Budget is immense, given that the key focus area of government is development and reassuring the foreign investor community of the economy’s stability. With the launch of the Make in India campaign, investors and businessman’s are optimistic about the Budget this year. It is clear that the government needs to encourage private sector participation, and enable huge investments in technology and skill development.