Why has the Union Budget regained its lost glory this time?

KS Badri Narayanan Chennai | Updated on January 25, 2020 Published on January 25, 2020

There’s exactly one week to go for the first full-year Budget of the Narendra Modi government in its second term. Union Budgets have long lost their importance in India with a number of off-Budget announcements being made by successive governments during their tenures and more so after the introduction of GST which has transferred the powers on indirect taxation to the GST Council.

However, this time around the Budget seems to have regained its lost glory with market watchers’ higher expectations in all respects, as the economy is surfing on weak waves. The Prime Minister’s ongoing meetings with corporates have also heightened expectations from the Budget.

There is unanimous agreement on one thing from economists to the common man: improve private consumption to boost the economy. Anticipation has been building up for a sizeable tweak in personal income tax slabs to revive consumption. Speculation is rife that the 5 per cent income tax slab may be lifted to the ₹2.5-7 lakh band from the current ₹2.5-5 lakh. For the income bracket from ₹7-10 lakh, the new tax rate is expected to be 10 per cent. For earners between ₹10-20 lakh, it could be 20 per cent.

Another sector that expects huge giveaways from the Budget is the equity market. Marketmen expect the exemption of listed shares from long-term capital gains tax (LTCG); rolling back of securities transaction tax (STT) or reintroduction of tax rebate under Section 88E to avoid double taxation and per trade transaction (if LTCG continues); and withdrawal of dividend distribution tax (DDT).

Of course, this time too, there are high expectations for the agriculture sector despite the good monsoon. Industry players expect additional incentives to farmers, especially those producing oilseeds reaching out to farmers through better implementation of DBT for fertilisers, increased allocation for PM-Kisan scheme (currently ₹6,000/farmer), and higher budgetary allocations for fertiliser subsidy.

The automobile sector which is facing a severe downturn, is also betting on the Budget for a booster dose. It is hopeful of announcements on scrappage policy of old vehicles to reignite demand. The expectation is that there could be some kind of incentives to customers for voluntary scrappage.

NBFCs & refinancing

With the NBFC sector facing a liquidity crunch, there is demand to include them into refinancing of SMEs to improve fund flow to the MSME sector. There is also a demand for setting up of a refinance window for NBFCs on the lines of National Housing Bank to HFCs.

But the most important focus area would be the fiscal math, especially for global rating agencies. With the government in a weak financial position, how it will generate funds to lift downbeat industries even while funding their ambitious programmes is a moot point.

The government is expected to report a minimum fiscal deficit of 3.6 per cent for FY2020 as it is trying to balance economic growth priorities with social objectives. Global rating agencies could revise their opinions on India on any further slippage in fiscal deficit. Recently, S&P Global has reaffirmed India’s sovereign rating at BBB- with stable outlook while Moody’s Investors Service cut India’s credit rating outlook to negative, citing prolonged slowdown in the economy.

Any further downgrade could trigger a flight of capital from India, that could make the stock-market investors’ life a more difficult one.

Published on January 25, 2020

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.