It is that time of the year — the Union Budget is all set to be presented by the Finance Minister on February 29, at the Parliament. Considering the current state of the world economy, Finance Minister Arun Jaitley needs to be extra cautious in preparing the proposals for the Union Budget 2016-17.
In general, I would expect the government to further boost programmes and policies such as Make in India, the ‘Housing for All by 2022’ scheme, Start-up India, and MNREGA. At the same time, it is important to control inflation and align the fiscal policy with the monetary policy to further sustainable growth. The reserve bank has decreased around 100 basis points on interest rates in the past year and I would like to see a greater part of it reach the people.
Economy’s stability
The budget should focus on maintaining the stability of the Indian economy, despite the current turbulence in the world economy. The revenues saved from the lower prices of oil should be properly distributed to subsidise other commodities, thus providing further welfare. The implementation of the 7th Central Pay Commission and One Rank One Pension should improve the conditions for the current working class. Subsidies for farmers and increasing the minimum wages are essential for the labour class.
The real estate sector should be a given boost to support the ‘Housing for all by 2020’ scheme by increasing tax benefits in the loan and insurance sectors for the public, and lowering tax rates for the builders. Digitising the tax system further will allow a greater reach and increase transparency in the system to enable a higher revenue from personal tax collection. Additionally, the ratio of corporate tax to personal tax could be further lowered to improve working conditions.
We must also continue attracting investment from outside, while at the same time incentivise 'off balance sheet' investment proposals, such as NHAI and railway projects, where it is possible to generate adequate revenue.
The minimum alternate tax (MAT) must also further be reduced in SEZs to boost companies. Service tax, which is a bane for new start-ups at the moment, should also be improved. Aspects like the fund-of-funds, which is great on paper but not very practical, needs to get implemented.
Aiding start-ups
I would also like the budget to set out clear and measurable timelines and not be as vague as it is now. Debt funding is also of vital importance to start-ups, and a credit guarantee mechanism could work wonders for them. The much-criticised angel tax should also be eliminated. The three-year tax break announced for start-ups by PM Modi, should also be reconsidered. Save for a miracle, three years is too short a period for a start-up to be of any significant advantage, and the duration should definitely be increased. Digital India is a vital cog in the wheel of the government’s initiatives, and it will definitely help the start-up ecosystem to become more vibrant.
The current ‘golden period’ for start-ups is too great an opportunity to miss and the government should exploit this and help catalyse the growth of start-ups via an effective budget and tax allocation.