Sunday, 15 January 2017

Budget 2017 likely to compensate for Demonetisation Pain

After the historic announcement of demonetisation in November, Union Budget 2017-18 is now seen as the silver lining.  The common man is expecting some relief with heightened anticipation of rebates, benefits and sops in the form of tax breaks to soothe the discomfort caused by the demonetization.

The expectation from the government this year are even more given the temporary slowdown expected in the economy on account of demonetisation. Apart from addressing the issues raised by demonetisation in the upcoming budget, there are two key changes which the Union Budget 2017 will witness. For the first time, the budget will be presented in the Parliament on 1 February 2017 as compared to the regular practice of presenting it on the last day of February. Defying the age-old tradition, the initiative of presenting the Union Budget in the parliament along with the Railway Budget is also a significant change this year.

With less than a month to go for the Union Budget 2017-18, there is a lot of expectations and speculations about what it has in store.  Following are some of the expectations that the industry has from this years’ budget.
The top expectation from the Budget is lowering of Income tax for the individual tax payers as well rationalizing the tax structure for the corporates. For individual tax payers, the government is expected to increase the tax exemption slab from Rs 2.5 lakh to Rs 3 lakh. The finance minister is also expected to bring down the corporate tax rate in the range of 27-28 per cent. A lower tax rate would bring some cheer for India Inc as it would help neutralise any short-term slack in growth due to demonetisation.
The Finance Minister is expected to focus more on farmers and on those sectors, which can create more jobs in the economy. The rural economy is crucial for India as over half of rural households depend on agriculture as their primary means of livelihood. According to Economists, the forthcoming budget will focus more on lifting the rural economy, which is badly hurt by the demonetisation drive.
Real estate industry also has high expectation from the upcoming Budget 2017-18. The government is expected to provide clarity on GST, raise House Rent Allowance (HRA) deduction and announce policies to standardize construction materials in order to uplift the real estate industry.
Further, auto industry is pinning its hopes on the upcoming Budget to lift consumer sentiment and looking for concrete incentives to promote fleet modernisation as well as electric vehicles. The automobile industry expects concrete policy on commercial vehicles and passenger vehicles.
With a vision to move towards a cashless economy and reduce the black money generation after the demonetization, the government is expected to announce further measures to encourage digital payments. Additional benefits to those opting for cashless transactions through credit cards, debit cards and mobile wallets are expected to be part of the Union Budget 2017-18.

As a result of the merger of the Rail Budget with the Union Budget, a lot of new measures focused on further development of infrastructure are expected. The modernization of railways is long overdue and the recent accidents are expected to give further impetus to increased government spending on railways’ modernization.
While there is a lot of buzz around the 2017 Union Budget, let’s wait and watch the upcoming events and hope that it will bring the smile back on the faces of the Indian citizens.
Latin Manharlal Group

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