Budget 2016: Arun Jaitley's task is to kickstart economy amid slowdown

New Delhi: As Union finance minister Arun Jaitley will rise on Monday to present his third Budget, he will have the daunting task to kickstart Indian economy amid global slowdown and create more jobs for the neo-middle class whose growing aspiration gave Narendra Modi an unprecedented mandate in 2014.

The task is challenging as the Economic Survey 2015-16 predicted that in 2016-17 India will grow either more or less at the same pace as in current fiscal or even lower.

Mr Jaitley is expected to revise fiscal deficit framework in the Union Budget 2016 to increase public investment to give push to the economy and try to revive the private investment cycle. Due to the 7th Pay Commission recommendations and OROP it will be difficult for Mr Jaitley to increase public investments without revising the deficit targets.

There is speculation that Mr Jaitley may hike service tax from 14.5 per cent to 16 per cent to garner resources at a time when tax collections are expected to fall. In GST, it is proposed that services should be taxed at 18 per cent, so hike in service tax in the Budget will prepare the economy for higher rates. He may also bring in a new cess for start-up initiative.

As far as salaried class is concerned, Mr Jaitley may increase the tax exemption limit marginally and rejig the tax slabs. He may give tax breaks for people to invest in equity markets. There is possibility of bringing provisions to tax some of the tax savings instruments on maturity so as to encourage long-term savings. Mr Jaitley may also give some tax incentives for people to transact through debit card, credit card or online to bring down domestic black money generation.

The finance minister could bring down corporate tax from 30 per cent in the Budget and phase some of the exemptions given to the industry. In the last Budget, Mr Jaitley had said that he intends to reduce corporate tax from 30 per cent to 25 per cent over four years. The Budget may address retrospective tax concerns.

Speculation of major tax changes have been fuelled by revenue secretary Hasmukh Adhia’s tweet that he will be available to media for any clarification on tax issues in the Union Budget on Monday afternoon.

Mr Jaitley is also expected to increase funding for irrigation programme in the country so that dependence on rains is reduce and agriculture production is increased in the country. There has been concern over farmers suicides due to deficient rainfall in the country.

As the government has increased share of the states in the tax collections, Mr Jaitley is not expected to announce any new major social scheme.