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Budget 2017-18: Expect cut in Income Tax rates, higher allocation for Agri, SME sectors

Dr Brinda Jagirdar, Independent Economist Growth is now the dominant theme and the government needs to show visible proof of its intentions to kick start investment, give a push to growth and generate jobs.
India TV Business Desk New Delhi January 24, 2017 12:22 IST
India TV Business Desk

Dr Brinda Jagirdar, Independent Economist

Growth is now the dominant theme and the government needs to show visible proof of its intentions to kick start investment, give a push to growth and generate jobs.  

Therefore, in my view, the Budget will focus on a three-pronged strategy for reviving growth i.e. reviving consumption, growing investment and supporting exports. Also, the government needs to acknowledge and reward the sacrifices and hardships borne by the common man in support of demonetisation. 

Since the government’s tax collections have gone up after demonetisation, we can expect a boost to consumption through reduction in income tax rates, raising the tax exemption threshold and continuing procedural simplification and transparency in tax collections. 

Agriculture and small scale industry sector are also likely to see higher budgetary allocations.

The government will use its growing resources to ramp up spending on infrastructure. We expect there will be incentives for affordable housing. Social sector including education and healthcare will receive a boost. In addition, we can expect to see higher defence spending, increasing energy and power sector spending, expanding expenditure on sports, and support for the environment.

 

The fiscal math is reassuring and the quality of the fiscal deficit is also what the RBI would like to see. The current account deficit is stable and close to 1% and in recent months the CPI inflation has consistently remained well within RBI's comfort level of 5%. 

More importantly, government has bitten the bullet on small savings and taken the politically unpopular but economically sound path of cutting small savings rate. And bank balance sheets also appear to be on the mend with NPAs bottoming out. So RBI also may now have greater policy space to cut rates and turn the spotlight more fully on growth to nurture the sprouting green shoots.