This financial year is about to end on a heavy note with the ban on high value currency notes leading to chaos and cash crunch across the country. The year 2016 has seen two major economic decisions taken by the government, one being the Goods and Services Tax and the second being the demonetisation move announced on November 8. While people are still uncertain about the impact of both these decisions, it is the budget of 2017 that is most awaited in determining the government’s way of dealing with the current situation of chaos and expectations in the country.
Apart from the expectations from the government to address the issues raised by demonetisation in the upcoming budget, there are two major changes which the Union Budget 2017 will witness. First is the merger of the Railway budget with the Union budget, and second being the change of date of announcement from the end of February to February 1.
Here are some of the major changes and expectations from budget 2017:
Departing from the colonial era tradition
The tradition of passing the budget on the last working day of February was part of the British administration in India that the Indian government inherited post independence. In November 2016, Prime Minister Narendra Modi announced a shift in date of budget. In 2017 therefore, the budget would be presented on February 1.
The change in date is expected to speed up the process of financial decision making for the upcoming year. The budget session in the parliament is expected to start from the second week of January. With the early planning and presentation of the budget, the government would get more time to efficiently implement financial decisions by April 1 without any delay.
However, the flip side to the decision is that with the advancement of the date by a month, there is less time for the various departments to collect data for the sake of budgetary planning.
Merger of Railway budget with Union budget
Marking a dramatic move away from the 92-year-old practice of presenting a separate Railway budget ahead of the Union budget, the railway and Union budget will be presented together. The process of preparing the Railway budget remains unchanged. A single appropriation bill would be prepared with the estimates of the Railway budget as well. The reasoning behind the move is to save time for the government by not having to hold consideration for two separate bills.
Expected tax changes
Ever since the planning of the 2016 Union budget, expectations have been high regarding changes in the existing tax structure. The 2016 budget was expected to raise the tax exemption bar from the current level of Rs. 2.5 lakhs to 3 lakhs per annum. Since, the change could not be carried out in the existing budget, it is expected to be announced in 2017. Further, with the grievances and pain inflicted upon the common man with the note ban move, the expectation of a raise in tax exemption rate is ripe.
Moreover, we might also see a reduction in tax rates that is currently at 10 per cent for incomes above Rs. 2.5 lakhs, 20 per cent for those earning above Rs 5 lakh and 30 per cent for those earning above Rs 10 lakh.
Welfare benefit measures
With the politics surrounding demonetisation being extremely critical to the government, particularly pointing at the difficulties faced by the poor, the ruling party is in an urgent need to devise policies that benefit the poor. This is already evident from the Pradhan Mantri Garib Kalyan Yojana that was announced by Prime Minister Narendra Modi on November 29. As part of the scheme, those with large amounts of unaccounted wealth, can deposit the same with a penalty of 50 percent on it as opposed to tax rate of 85 percent for those who do not opt for the scheme.
Keeping in mind the government’s need to please the poor, the 2017 budget might see a number of welfare measures and pro-poor schemes which could see a surge in social spending expenditures.
The other aspect of benefit measures can take the form of incentives for digital payments. With the rhetoric of a cashless economy taking centre stage in the aftermath of demonetisation, the government has already taken a number of steps to encourage electronic payments. Service tax on payments made through debit and credit cards upto Rs. 2000 have been removed. More recently, Finance Minister, Arun Jaitley announced a list of measures as incentives for digital payments which include cheaper petrol and diesel when paid for electronically, discounts on railway tickets and highway tolls.
Given the trend of incentivising cashless transactions, we might expect a number of sops encouraging e-payments in the 2017 budget.