28 Feb 2016 21:33 IST

Finding the middle ground

The Finance Minister needs to balance capital and current expenditures to deliver a good budget

The Union Budget 2016, to be announced on February 29, has more than its share of expectations, given the number of reforms the NDA government has bought in. With yhe salaried class facing the rising inflation and cost of living, an increase in the tax slab to ₹3 lakhs would be a welcome move. Also expected is the higher deduction limit in the home loan interest. The medical allowance of ₹15000 per annum along with education and hostel allowance of ₹100 and ₹300 respectively per child are clearly inadequate given the current scenarios. From the point of view of savings, Section 80C is of importance to the working class, as it covers all small saving schemes such as the NSC, EPF, PPF, payment of insurance premiums and investment in government specified bonds and also provides for exemptions for ₹1.5 lakhs per annum. A rise in this tax exemption as well as the inclusion of some more saving schemes under this bracket is expected.

Implementation fo Policies

With the current government being pro-industry, it would be interesting to see the measures it will take to leverage its various plans, such as the Make in India scheme, Digital India and Start-up India. The focus should be on the development of SEZs and implementing a clear tax policy. Another major announcement that the industry would be waiting for is the implementation of the Goods and Services Tax (GST), which will be a game-changer. Apart from reducing basic business costs and enabling competitive pricing, GST would help in making our exports more competitive, thus leading to an overall increase in GDP.

For this to be a good budget, the Finance Minister needs find a middle ground between the capital and current expenditures. The trend so far in the economy has not been positive and the expectation would be to see a rise in public expenditure and infrastructure spending in order to boost investments in the economy. But these measures need to be taken keeping the country’s fiscal deficit in mind andthe drop in oil prices can induce the government to relax the constrains and increase investments.