How about one for the history books?

In form, the upcoming budget will be historic — date advanced by a month, combined with the Railway budget, differentiation between Plan and Non-Plan expenditure eliminated, and following an eventful demonetisation exercise. Will it be equally historic in substance?

In the last three decades there have been three historic budgets. In 1991, Manmohan Singh set in motion the liberalisation process; in 1997, P Chidambaram rationalised direct taxes; and in 2012, Pranab Mukherjee infamously introduced retrospective taxation.

For Finance Minister Arun Jaitley, this might yet be the final opportunity to deliver on a big bang reform-oriented budget. By this time next year, the focus would have shifted to the 2019 general election. Many of the promises in the “Sab ka Saath, Sab ka Vikas” manifesto of the ruling party remain unfulfilled. The manifesto included several pledges: productive youth, involved women, flourishing agriculture, quality of life in villages and cities, globally competitive economy. Prime Minister Narendra Modi is fond of report cards and in most election speeches pleads with voters to demand a report card from the incumbent government. This Budget must address these pledges so that the ruling party can produce a report card in time for the next parliamentary election.

What does it take for Jaitley to deliver a budget that can return the BJP to power with an even larger majority? In essence, he should combine the basic themes of the 1997 and 1991 Budgets and negate what was done in 2012. Lowering taxes, liberalising business regulations, and repealing retrospective tax legislation combined with a thrust towards digitisation and boosting the rural economy must be the basis for most of the spending in the next fiscal year.

Tinkering with income tax slabs is passé. The finance minister must completely abolish the 20 per cent slab and increase the limit of 10 per cent tax rate to ₹10 lakh. He must also do away with the education and Swachh Bharat cess that accompanies income tax. Finally, he should increase the tax rate for income over ₹10 lakh to 32 per cent. Eliminating corruption has been high on the Government’s agenda. Hence, agricultural income must be brought under the tax net.

Demonetisation alone will not suffice to become a digital economy. The Government must provide incentives for people, especially in the low income and unorganised sector, to use the banking system. All Indians must get used to filing income tax returns. ‘Earned Income Tax Credit’ will force the employed to deposit their earnings in a savings account. Instead of pay slips, workers must be asked to provide bank statements as proof of monthly or weekly salary along with an annual income tax return to claim tax credit. For someone earning less than ₹1lakh, a 10 per cent credit could be offered while workers earning between ₹1lakh and ₹2lakh could be paid 5 per cent credit. Such an incentive to use the banking system is a better proposition than coercion through demonetisation or Universal Basic Income.

For further liberalising the economy, Jaitley must consider a tatkal scheme that fast-tracks the process for entrepreneurs and industrialists to obtain permits, licenses and clearances. The Budget must also deliver on “Minimum Government, Maximum Governance”. The recently released working paper on PSUs by the National Institute of Public Finance and Policy provides a blueprint to raise capital of $250 billion. The comprehensive study suggests that out of the 285 PSUs, barring seven large Maha Ratnas, the rest are prime candidates for disinvestment and liquidation.

To boost the confidence of foreign and domestic investors, and to give the economy succour from the ill-effects of demonetisation, it is important to repeal retrospective taxation. Agriculture and the rural economy were disproportionately affected by demonetisation and hence need a boost. Rural India will benefit if the Government develops infrastructure, gives a fillip to mechanisation and invests in an agriculture value chain that boosts farm incomes. Will the finance minister deliver a budget that gets a thumbs up from voters and makes a mark in the annals of history? We wait with bated breath.

The writer is a Bengaluru-based money manager