5 ways in which budget 2015 could change india
TRANSCRIPT
Ways in which Budget 2015
could change India 5
Finance Minister Arun Jaitley‟s last budget was delivered within two
months of assuming office. This time around, he is expected to deliver a
budget that is widely expected to change the course of India‟s economic
history.
Here are five things that need to be done in the budget to change India:
Union Budget 2015
#1 Better Tax Regime is good for business
India‟s tax regime has been characterized as complicated, shortsighted
and fickle. Tax rates change and new taxes are levied almost every new
year. This year, the finance minister must simplify the tax code and lay
down a broad framework of tax policies that will endure for 5-10 years. This
should support the government in its endeavor to push India up in the
global „Ease of Doing Business‟ ranking. India is ranked well below 150 in
a global ranking. Prime Minister Narendra Modi has announced that he
wants to push that up to 50.
#1 Better Tax Regime is good for
business
If India rises up in the “Ease of doing business ranking”, foreign investors
would bring in the capital needed to boost India‟s infrastructure.
How this changes India
#2 Investment in Infrastructure and
implementation of GST
The government expenditure must be directed towards long-term growth-
generating avenues such as roads, railways, and ports development and
affordable housing. Plans to invest $250 billion in power projects over the
next five years, including $17 billion in this fiscal itself, have already been
announced. These must be directed towards renewable energy projects
and away from imported coal-based ones. If India can make it easy for
people, goods and services to move around, it would be the single most
transformational change. The implementation of a single Goods and
Services Tax across the country could help immensely by integrating the
market.
#2 Investment in Infrastructure and
implementation of GST
When India becomes a single integrated market, goods move freely. Better
infrastructure could mean ease of movement for people and goods. That
enhances ability of producers to take goods to markets quickly. It is needed
to rein in inflation caused due to supply side constraints.
How this changes India
#3 Disinvestment to raise funds for the
Government
There is a potential of raising another Rs.60,000 crore from disinvestment
this year, according to CII, an industry body. Another Rs.2,00,000 crore is
sitting idle on PSU balance sheets. Over Rs.22,000 crore is expected from
the recent Coal India stake sale. These, if harnessed, would be giant steps
towards achieving the fiscal deficit target and finance long pending growth
programs. The finance minister must outline a firm target and a clear
schedule for disinvestment. The government needs to focus on being an
enabler than a player in the market. Bit by bit, ownership in businesses
should be cut so that it can focus on administration.
Disinvestment to raise funds for the
Government
The government machinery is too involved in the day-to-day affairs of
public sector companies. With a wider shareholding for PSUs due to
disinvestment, they could get efficient. At the same time, government will
realize the much needed funds from disinvestments.
How this changes India
#4 Personal finance and consumption
spending
A large workforce offers the potential for high consumption spending.
However, a high-tax regime takes away a large chunk of income and
tarnishes this potential. Thus, tax rates must be lowered to boost
consumption expenditure. This will subsequently lead to high corporate
earnings. In turn, this will spawn more employment and will ultimately lead
to more taxpayers and higher tax revenues. The Finance Minister may
increase the tax exemption limit. He may also rejig tax slabs and cut rates
across slabs.
Personal finance and consumption
spending
Any rationalization of tax rates means more money to consumers. This
could boost spending and enhance productivity in India. In a complex world
that is facing a slowdown, a buoyant domestic demand driven market could
sustain long-term economic growth.
How this changes India
#5 Boost to manufacturing
Minimum Alternate Tax or MAT is a mechanism that prevents companies
from exploiting inconsistencies between the Income Tax Act and the
Companies Act to avoid the tax. It asks companies to pay tax at 18.5% rate
if they report profits according to the Companies Act but not the IT Act.
Reduction of MAT rate for manufacturing and SEZ entities would attract
domestic and foreign entities to the manufacturing space. Media reports
suggest that tax holiday to such entities is being mulled by the finance
minister.
Boost to manufacturing
It could give a fresh impetus to the „Make in India‟ campaign. If
manufacturing gets a boost, it could create new jobs that could keep young
Indians busy.
How this changes India
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