Written by Prashant Girbane
On Monday, the 1st of February, The Hon. Finance Minister of India will present a budget that she has termed as ‘once in a century’. While we wait to hear about its once in a century features, it for sure is a budget after a pandemic, which is a once in a century affair.
The biggest expectation from this budget is that the Government shall continue its spending to boost the economy, especially when the three other engines of the economy, i.e. the consumption, investments and exports, are yet to regain full momentum and desired growth. Of course, the Budget allocations towards capital spending/investments needs to increase from the current less than 14 per cent.
The overall spend still needs to ensure that it does not breach 5 to 5.2 per cent of fiscal deficit next FY as against the expected fiscal deficit of 6.5 to 7 per cent this FY. We also expect the budget to give signals for medium-term plans to bring the fiscal deficit to the FRBM target of 3 per cent.
One of the most elegant ways to manage this conundrum is to raise non-tax revenues from the divestment of PSUs (Public Sector Units), especially the Public sector banks that need significant reforms to make the banking system more efficient, thereby reducing the cost of money while increasing the reach of credit and other banking products far and wide.
The benefits of these macro reforms may not be evident to the common man, but they impact every Indian, every MSME (Micro, Small and Medium Enterprises), including tens of thousands of those in Pune. Such reforms would help MSMEs take more formal credit from banks. Currently, 70 per cent of loans taken today are from informal sources which cost more and make MSMEs uncompetitive.
Like most MSMEs in India, about 2,50,000 of those in Pune district will also expect increased interest subventions and decreased compliance burdens.
The pandemic has moved more than a crore out of jobs. Additionally, about 70-80 lakh Indians aspire to join the workforce every year. These two factors put a responsibility on the FM to present a budget that focusses on creating jobs. This job creation requires a significant push to the manufacturing sector, especially labour-intensive manufacturing, like textiles and leather. The industry will also expect significant support to exports by rationalising import tariffs along with other incentives.
Auto and auto components is one of India’s major industries, contributing to more than 7 per cent of GDP and a quarter of manufacturing. Maharashtra alone contributes 35 per cent of value to the Indian auto industry. Pune district is the central auto hub in Maharashtra. The auto industry expects lower GST rates, more income tax reliefs and a new scrapping policy.
There are poor prospects of GST rate reduction in these trying times, and this needs to be dealt with by the GST council outside of the budget. There might be some tinkering in the income tax relief but not much, as again, the tax revenue collection would be one primary objective of the Government. However, the scrapping policy must be announced in this budget and implemented as soon as possible. This would ensure that the old polluting vehicles are taken off roads for recycling, and there is more demand created for new vehicles, thereby creating more jobs in the industry.
It would be very natural if the sectors like hospitality, travel, and tourism expect some sops as they are worst affected by the pandemic’s lockdowns.
Among the crore jobs lost, most are from the urban areas. While the much-needed MNREGA spend helped the rural economy, we haven’t had a similar scheme for the urban jobless and hence there is an expectation of some allocations for the urban unemployed.
While the list of expectations would run long, these are some of the key expectations that matter to a wide range of Indians, especially to those in Pune District and some other parts of Maharashtra.
The author is a Director General of MCCIA. Views expressed are that of the author.