Written by Vijay Sharma
The Union Budget will get presented in the parliament on 1st February 2021. All citizens of the country are looking forward to experiencing a union budget like never before. This budget can also give a boost to the Indian economy. With the upcoming budget knocking on the doors, here are some of the expectations and updates that you can look forward to from the Finance minister, Nirmala Sitharam, and this year’s Union budget:-
We have many expectations from the upcoming union budget with Finance Minister Nirmala Sitharaman promising reforms to revive the economy after a tumultuous 2020.
- Startup-
The government should look into introducing more tax benefits for startups, owing to their global success. Businesses have suffered huge losses after the pandemic. Making up for those losses can be quite a job. If we expect the investment scenario to go back to how it was in the pre-covid period, a new systematic process for attracting investments is necessary. The current employment sector and the sluggish job market will have many positive impacts on this. The startup tax benefit program needs an extension so that it can sustain and expand different businesses. Doing so will enable reinvestment of the profit. FDI has a two-fold effect, and they can be long term.
But, in the present situation, FDII should find it easier to make investments in the beginning stages of any startup because this will stop the government from being the only provider for the startup push. “Stand up India “ program enables the bank to loan 10 lakh to 1 crore to Schedules Castes (SC) or Scheduled Tribes( ST) categories and women. Such programs show high rates of return and hence should receive more importance. From Tier 1 cities, 55% of the recognized startups originated, Tier 2 cities had 27%, and Tier 3 cities had 18% of the startups between the years 2016 and 2019. We saw that a chunk of entrepreneurs from tier 2 and 3 have the goal of aspirational India served.
E-commerce -
The new budget needs to have a provision for e-commerce. E-commerce has been the backbone of the Indian economy and even during an ongoing pandemic. One can expect the government to reduce GST rates, which will boost the purchasing powers of consumers. Reduction of GST rates will help businesses to maintain a healthy cash flow and aid e-commerce.
Individual Tax Slab -
The whole country is facing a financial strain. The solution to such a problem would be a reduction in personal income tax rates. Doing this will assist people in overcoming the setbacks better in such trying times. Experts in taxation have suggested increasing the tax exception limit which, may result in a considerable boost in the hands of the common man.
GST-
The Goods and Services Tax (GST) has been a hot topic of discussion ever since its implementation. MSMEs want the GST to be simplified. Surveys conducted recently show that GST has been a challenge in the sector. Trade associations have viewed GST as a complicated and obnoxious taxation system. Simplifying the tax regime needs to be one of the goals in the upcoming budget. There are issues related to the GST rate as well. A much-heated debate goes on the GST rates to be cut from 18% to 5% on professional services which fall under MSME units like CA, marketing, Human Resources, supply chain management, etc. MSMEs are in support of the removal of GST under the reverse charge or services that are obtained from overseas. Such issues need urgent redressal.
Interest Rates -
The credit crunch is a huge challenge in this sector. Even though the center had provided assistance for it in the COVID-hit sectors, that is not enough. There is a lot more to do so that interest rates get reduced. This will lead to a flow of credit to different sectors. These steps are required so that the FDI is attracted and the system of foreign exchange inflow gets reformed.
Export -
When it comes to export, the center awaits to take measures that will push this sector. The pandemic has hit this sector hard, and the current government needs to focus on its growth. The cost of credit needs urgent redressal here as well. A strategy to make the sector improve its infrastructure, marketing assistance, market, and product diversification is required.
IT Infra & Manufacturing-
India and China have been on a tight leash with their IT battles. The government needs to invest a lot in IT infrastructure and manufacturing. Investment in such fields will work as a solution to many problems of unemployment in the country. A push-in technology will cause a ripple effect and give more opportunities for research and skilled labor.
Online Education-
Degree level online education programs for students of deprived sections of the society should now be taken to more scalability by the EduTech sector. Thus enabling more opportunities in higher education for students. Decreasing tax in such institutes will benefit the youth, who are the future of our country.
Electric Vehicle -
Sustainability is the new goal. Last year Solar power was the highlight and this year, the electric vehicle is in the spotlight. This should find its place in the budget. Even the defense sector is evolving with drones, bioweapons, robots, and others. There will be a decrease in the import expenses if there are higher investments in R&D in this particular sector. It can even serve the end goal of a self-sufficient India.
Agriculture -
In 2020, agriculture occupied the 8th position in the budget quotient of spends. In the current year, agriculture needs to be in the top 5 spends. The sole reason for this being that India needs to revive its economy from its roots.
Healthcare-
Senior citizens, as well as non-taxable income groups, need to have access to the vaccine free of cost. Healthcare needs to be given the special attention that way.
Covid Cess -
The total estimate of vaccinating more than 130 crore Indian citizens falls within the range of Rs. 50,000 to Rs. 60,000 crore. The finance minister needs to be on the lookout for other sources to find this money. The fiscal deficit situation for the year 2020–21 which will end on March 30, 2021, is probably going to be more than 7% of the GDP. This is more than double the 3.5% target that the government had set in the last budget. The current economic contraction can lead to a fiscal deficit of as much as 8% of GDP.
The cost of the vaccine will in all probabilities be paid off by the people in the form of a cess. Cess is usually a tax that has a specific purpose and duration. Examples of such cess can be the Swachh Bharat Cess, education cess, and some others. This cess is unavoidable and hence it can be done on groups who have higher income rates.
Import duties-
Import duties are bad news to even local manufacturers, hence the government sees it as their responsibility to safeguard the local industry from the cheap foreign export dumps. The latest Reuters report claims that the government is trying to hike import duties on many items in the new budget. These items include smartphones, electronic goods, and other kinds of appliances.
To boost local manufacturing and subsequently reduce the country’s dependence on imports, this is done. However, in a year when employment and income remain low, this might hit badly on the spending capabilities of the consumer. This should also be seen as a reason to increase raw material prices all over the world which is putting pressure on the consumer companies across categories to mull price hikes to save margins. An import duty hike in such a situation will not be good for the spending power of the common man.
The budget of 2021–22 will prove to implement the goals set in the last year’s budget. In terms of GDP, India holds the position of being the 5th largest economy in the world. To make up for the losses incurred in the covid stricken country the IT, Edutech, Infrastructure, and agriculture sectors need to be strengthened. Reduction in tax rates for lower and middle-income groups needs to be done to cope with the new year.
