“It gives me immense pleasure to announce that the retrospective tax clause in the Income Tax Act 1956, stands removed with immediate effect.”
Ahh…what a start it will be to the budget speech scheduled to be delivered by Mr. Arun Jaitley tomorrow. India craves to experience a golden era ushering in waves after waves of global capital, technology and skilled individuals. The upcoming budget, long touted as the deal maker or breaker for the nation is set to get unveiled this Saturday.
Mr.FM and his Pandora Box before presenting the Union Budget 2014 in Parliament
Expectations are sky high and rightly so. Storming into power last summer, the BJP led Government won on the mandate focusing solely on the lines of development and growth. With a complete washout in the Delhi Assembly elections, and increasing questions on the achievements of the new Government, the Budget comes as an opportunity for the state to showcase their commitment to the India story.
So, what is a Budget? How does it affect us? And what do we expect from it?
Let’s try and understand all this in a simpler way.
Budget – Just as you and I set out our all possible sources of cash inflow and outflow, in the same manner the Government prepares an annual Income vs Expenditure analysis. The Govt. machinery works throughout the year towards the achievement of this broad framework. It sets out a path on which the nation develops while bearing the cost to carry on.
Budget and You – I am sure you must have heard about the Budget before. The buzz made around it is difficult to ignore. With technical and fundamental analysis juxtaposed with the views of all high and mighty, the idiot box turns into a Gyan Sotra in the run up to the event. You might argue and say ‘I don’t feel the impact of the budget much’- but it’s not that way. The annual accounts of India affect you in every way possible, with a few striking examples being-
- Income Tax – From the basic Income tax slabs to the exemptions, deductions and allowances. This direct tax is the main source of revenue to the national exchequer. A movement of Rs.50,000 either way is enough to make Indians crazy.
- Excise Duty – From those swanky cars for men, to those short dresses for the ladies. From processed food to the inner wears, increase in this duty, levied on manufacturing of goods, hits your purse the hardest.
- Custom Duty – Videshi samaan becomes costlier. Electronics are the number one category to get affected by the import duty. Give a call to your tech-savvy friends, they will tell you about their pain in detail.
The expectations –
Getting back to our discussion, let’s go through the top 5 decisions, which if taken, are capable of altering the trajectory towards the unchartered territory of trust in the economy, leading to a gradual build-up of investor confidence and faith.
1) Overhaul of the Tax Regime-
A stable and predictable tax structure and laws are need of the hour. With archaic and gibberish clauses in the Income Tax Act, India Inc. wants the Govt. to step up and change to a new and rational tax structure. With not so reliable claims of GDP estimates in the recent past, India should do better in making public national figures more carefully so as to avoid trolls over it.
It’s more important to bring in a structural change than
getting lost in a web of sections and clauses
2) More Execution More Action-
Spurring growth should be the topmost priority. Growth is an attribute which makes all the other aspects tick. A higher GDP acceleration will not only tackle the deficit woes but the higher production levels will contribute towards shrinking bottom lines of corporates. Low but broad tax structure, meeting the disinvestment targets, curtailing expenditure incurred for fuelling political base, and bringing in risk and reward principle for tax exemptions will give greater room for public investment.
Only action can help cut the red tape
3) Introduction of fiscal reforms
A simple Direct tax law incorporating exemptions based on merit and rational deductions will go a long way in changing to a much certain investment climate. Reduction in MAT(Minimum Alternate Tax) and DDT (Dividend Distribution Tax) will help repose the faith of the industry. Giving tax holidays to start ups will help encourage the entrepreneurial energies. Why just the industry, introduction of GST (Goods and Services Tax) will encourage the consumers to create more demand eliminating the cascading effect of indirect taxes.
Fiscal reforms will make that baby groove
4) Reap the Demographic dividend-
With more than a million joining the workforce every month, it makes sense to invest whole-heartedly in the abilities of the youngsters. Even though there is abundant labour available still the industry doesn’t many employable. The problem lies in our education system, which doesn’t emphasise on skill based employment. Slogans of “Sabka Saath Sabka Vikas” will do little unless it is succeeded by action. The immediate need is to set up high quality skill imparting institutions and collaborating with the private sector in placement of the students, else it will soon turn irrelevant in the modern age.
64% of India’s population is expected to be in the
age bracket of 15-59 years by 2026
5) Digital infrastructure the way ahead-
A digital revolution is just around the corner. All of us live in a world filled with technology and computers. The future capabilities are limitless and so are the opportunities. With “Digital India Campaign”, a greater thrust towards enhancing the digital infrastructure is much needed. With less than 12% broadband penetration, India is yet to experience the internet. With an ambitious USD 17Bn national optic fibre project in the pipeline, the Govt. can help leverage technology and help us enter a new age.
Leveraging the technical skills with technology
can help us become a net exporter with time
Mr. Arun Jaitley has his hands full. Instilling action in an economy is not easy, especially in a country like ours. We are not critical of the Govt. in charge, all we are saying is “You can do better”.
Want to know how the budget will affect you ? Catch up with us tomorrow when we decode the Union Budget 2015-16.