28 Feb 2016 21:58 IST

Pragmatic versus Populist: What will Budget 2016’s stance be?

All eyes will be on Arun Jaitley as he presents the Modi government’s first proper Budget

Come 1100 hours on February 29, a convention from the late 1990’s will be underway at the Parliament House in New Delhi — Finance Minister Arun Jaitley will present the Annual Financial Statement; or as it is popularly known, the Union Budget. But why should the Budget be important to us in the first place? We live in a democratic country and this is the Government we elected. The Budget is when one gets a fair idea on how the elected representatives decide to take the country forward — whether the taxpayers money is being used justly, or if the country is pacing forward in this increasingly integrated global economy. Budget 2015 was announced under the shadow of the previous government policies and was a simplistic budget with the rationale of putting in place a framework and setting up systems. With the government now close to completing two years, it is expected to undertake a host of different initiatives while addressing the common man’s issues — a philosophy that has been laid out since the new government has been elected at the helm.

Tax and transparency

Speaking of taxpayers’ money, it’s a shame that in a country with a population of over 1.2 billion (120 crores), why is it that only 3.5 crore are within the tax net? Not only does this mean you and I have to pay higher taxes , but also that there is a large amount og black money. The Easwar Committee has advocated not only simplifying the tax regime, but also making it more convenient for the taxpayer themselves, by giving them timely updates on tax returns and timely refunds. With the increasing push for Digital India and transparency in government, it is time the bureaucrats in the Income Tax Department adopt and incorporate the use of technology in its daily affairs.

A long standing demand that pops up every year is that of increasing the exemption slab, this year from ₹2.5 lakhs to ₹3 lakhs. Putting more money in the average man’s pocket was carried out just last year, so I don’t think it should be done this year as well. Instead, simplifying the tax structure would go a long way in both, fulfilling the purpose of filling people’s pockets as well as setting a framework for removing the demons of tax collection itself. A long standing demand of the salaried individual is to only be taxed on the salary component of compensation and not on the various different heads. Maybe the government should consider such a proposal.

GST and 7th Pay Commission

The government is expected to take several measures to push the consumption upwards, as well as give a strong boost to government spending. With payout from the 7th Pay Commission already expected, and the GST just round the corner, the burden on the Finance Minister has already been reduced. Huge expectations have already been placed on the Government regarding sops and incentives to the e-commerce industry, one that is booming across even the smallest towns, which has now become one that demands the Government’s attention. The need of the hour also warrants spending on two fronts — infrastructure and social security. On the government spending end, the ministry received a lot of criticism for ignoring social security spending. The Make in India and the Start-up India programmes were not unilateral. They are not going to be as successful without investments in infrastructure and social security.


These are the two most important dimensions that I would want the Budget to cover. Nevertheless, a list of measures to expect is as follows:

~~ Lower corporate tax rates and lower dividend distribution tax. The Government has mentioned this as one of its goals over the years.

~~ Bank Recapitalization and Banking Sector Reforms. Without a strong banking sector, the economy cannot survive. With the NPA situation in banks in distress, it is time the government addresses these issues and solves them before they escalate.

~~ A roadmap on fiscal consolidation. This may help boost investor sentiments and power the economy.

~~ Downsizing subsidies: bringing down the number of subsidies through inviting investments, removing bottlenecks and using DBT to weed out corruption.

The world will be watching Arun Jaitley address the a nation on the last day of February, as per tradition. The government has had a record of being more pragmatic than populist and with new age India imposing its dominance over the world, pragmatic is the new populist. The Budget is expected to take such a stance as well.