All eyes are set on Finance Minister Nirmala Sitharaman, who is almost prepared to present her consecutive eighth Union Budget on Saturday, February 1. Almost all sectors have demanded concessions in pre-budget talks with her. It is neither feasible nor desirable to accept all demands, however, the finance minister is expected to prepare the budget to address the economic issues of the time and come out with decisions that may shape the economy.
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The government earlier announced that it would limit the fiscal deficit for FY 2025-26 to 4.5% of the GDP, leaving limited leeway for too many concessions.
Steps To Increase Consumption
However, analysts believe, Nirmala Sitharaman has to increase consumption so that the manufacturing, services and all other sectors get the much-desired boost, the government gets more revenue and the economy is boosted.
Analysts believe, as the first priority should be on increasing consumption the Finance Minister should be focusing on leaving more money with the common man so that he could use this disposable money for consumption and investment.
The Confederation of Indian Industries (CII), the apex body of chambers of commerce, has advised the Finance Minister to reform income tax and give more concessions.
Income Tax
It is believed that Nirmala Sitharaman may come out with income tax concessions by increasing standard deduction, and slashing the number of income tax slabs as well as its rates.
If the finance minister merges the two tax regimes and abolishes the concessions under 80, 80D, HRA, she may slash the tax rate and make the income up to Rs 10 lakh tax- free.
GST Rationalisation
Analysts believe the same logic may be extended to a corporate tax regimes as well. The corporate tax applicable to domestic companies is 25% for FY 2024-25.
Besides, the companies have to pay surcharge and also enjoy concessions depending on the turnover and the sector.
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Nirmala Sitharaman is not expected to slash the corporate tax as she is under the pressure of cutting the fiscal deficit and increasing government expenditure.
The GST rationalisation has been one of the major demands of companies, particularly the Fast Moving Consumer Goods.
A the consumers have to pay the GST ranging from 0%, 5%, 12%, 18% to 28%, there is much scope for confusion and discontent.
The demands to slash GST rates are made from time to time and the GST Council holds meetings at regular intervals.
However, many unsatisfied sectors are there. The finance minister came under scathing attack for imposing different GST rates on different types of popcorn.
Will Nirmala Sitharaman Increase Expenditure?
As Nirmala Sitharaman is expected to focus on increasing consuption and government expenditure, she is most likely to spend more on capital expenditure or capex, as it is called.
The finance minister allocated Rs 11,11,111 crore for capex for FY 2024-25. It was an increase of 11% compared to FY 2024-24.
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Experts believe, even if she does not increase the allocation for capex, she must not slash it.
If Nirmala Sitharaman chooses to keep the capital expenditure at 11% of the GDP, it should go up marginally as the total allocation is certain to go up.
Renewable Energy
At a time when US President has announced to go back from the climate change promises and increase money on oil exploration and drilling with his catch phrase “Drill, baby drill”, India is most likely to increase more on renewable energy.
Analysts believe renewable energy may take centre stage in the upcoming Union Budget and the finance minister my focus on “building on the success of the PM Surya Ghar Muft Bijli Yojana, which has already seen 1.28 crore registrations.”
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Analysts believe after the GDP growth rate came down from 8.2% in FY 2023-24 to 6.4% in FY 2024-25, the finance minister in under pressure to push the growth trajectory.
Under these circumstances, Nirmala Sitharaman is likely to take steps to increase consumption, cut tax rates, increase the allocation for job-related schemes like the PM Mahatma Gandhi National Rural Employment Guarantee Scheme, rationlise the GST and many more steps.
However, the finance minister also has to keep the fiscal deficit under 4.5% of the GDP. It is a difficult exercise and an uphill task.
