With the Economic Survey sending positive signals about the state of the Indian economy, sops in Thursday’s Budget are not unexpected
Even as the Beating Retreat ceremony was underway at the Rajpath on Monday evening, a few meters away in the North Block, officials were busy giving final touches to the Budget for 2018, the last one before the next General Election. Early in the day, as Union Finance Minister Arun Jaitley presented the Economic Survey, its findings did send out positive signals about the state of the Indian economy and there were many reasons to be happy about. The doomsday prophecy of the Indian economy by the opposition parties were summarily rejected. Among others, many more people filing tax returns certainly augurs well for the economy. And even as many sulked for not finding reasons to nail the Government this time too, I exulted and complimented the Narendra Modi Government for having created a system which ensures many more fall in line, and follow tax compliances. It reminds us of what John Maynard Keynes once said, “The difficulty lies not so much in developing new ideas as in escaping from old ones.” We certainly seem to be escaping from this very old idea and bad habit of not paying taxes.
“A preliminary analysis of the Goods and Services Tax (GST) data reveals that there has been a 50 per cent increase in the number of indirect taxpayers, besides a large increase in voluntary registrations, especially by small enterprises that buy from large enterprises and want to avail themselves of Input Tax Credits (ITC),” the Economic Survey, 2018 noted. Similarly, there has been an addition (over and above trend growth) of about 1.8 million in individual income tax filers since November 2016 — and while this may not be good enough, it indicates a positive trend. According to the Economic Survey, there were 9.8 million unique GST registrants, an increase by 3.4 million, compared to the previous tax regime. While Maharashtra, Uttar Pradesh, Tamil Nadu and Gujarat have registered large increase in the number of GST registrants, West Bengal has seen the largest increase in the number of tax registrants. It is no rocket science to decipher that this formalisation of the economy shall have long-term benefit for the country.
The Economic Survey also affirms India as one of the best performing economies in the world over the past three years with an average growth of four percentage points higher than the global average and three percentage points higher than the average for emerging market economies. It is also heartening to note that as per Government data, progress has been made in providing bank accounts, cooking gas, housing, power, and toilets. These findings suggest that the lives of the poor and the marginalised will improve in meaningful ways. Gross Domestic Product growth has averaged 7.3 per cent for the period from 2014-15 to 2017-18, which is the highest among major economies of the world. “A series of major reforms undertaken over the past year will allow real GDP growth to reach 6.75 per cent this fiscal and will rise to 7 to 7.5 per cent in 2018-19, thereby re-instating India as the world's fastest growing major economy,” the Economic Survey said. View this all in conjunction with bold reforms in form of GST and Demonetisation and other measures including bank recapitalisation, and we have ample reasons to cheer and cherish!
Having set the tone, what's going to be major focus of this year's Budget is not too difficult to guess. While the formalisation of the economy will take time to fructify, the Government's fiscal policies, say experts, have been in the right direction. Considering the criticality of the time, one is inclined to believe lot of good news this Thursday. Especially the farmers, women, unemployed and common people are going to be at the centerstage of this Budget.
Agriculture is certainly a big focus area and the Finance Minister has hinted in as many words. “Ensuring that benefits reach the agri-sector and growth is visible, this is among the priority areas for us,” Jaitley said recently. The focus is also likely to be on the salaried class who were hit by demonetisation. There is lot of speculation that the basic exemption limit could be increased from Rs 2.5 lakh to three lakh rupees in the Budget. The Budget could also be designed to address concerns of the common people. Many were expecting that basic exemption limit could be raised in the previous Budget itself to help neutralise the effect of demonetisation. However, only some changes in the tax slabs were effected. For example, rate of taxation was reduced from 10 per cent to five per cent for individual assesses between income of Rs 2.5 lakh and five lakh rupees, which resulted in a reduction in tax liability of all persons below five lakh rupees income either to zero (with rebate) or 50 per cent of their earlier liability. This was expected to help people save more, especially those whose income was below Rs 50 lakh. This time around, it is hoped that the Government could increase the income tax slab limit for 20 per cent tax from five lakh rupees to seven lakh rupees and for the 30 per cent tax from Rs 10 lakh to Rs 12 lakh.
Experts feel that lower tax rates encourage less tax evasion and, therefore, there is merit in the Government encouraging the public to pay their taxes honestly by reducing the tax rates and/or increasing the income tax slabs. Ronald Reagan had said, “Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it.” We certainly fit in the second category and the Budget will further boost this spirit.
(The writer is a strategic communications professional)
