Budget expectations: The roadmap for revival

Budget expectations: The roadmap for revival


Anirudh Gupta

Anirudh Gupta

234 week ago — 4 min read

Background: The Union Budget will be presented on 1 February 2020. Founder of Ashiana Financial Services, Anirudh Gupta opines that the economy is in a revival mode. The question is, will the budget be the catalyst for further revival? Here he shares his expectations from the upcoming budget.

The economy runs on certain foundations:

  • Consumption
  • Infrastructure
  • Services
  • Exports
  • Agriculture

In the current situation only government spending by way of infrastructure is happening and this has helped steer the course of the economy. However, going forward it is likely that an enhancement in infrastructure spend may not happen on account of fiscal issues. Off balance sheet borrowings may surface during the course of the year which needs to be watched.

Exports have been at a similar level since the last 5 years. The trade issues hopefully when they get sorted over the course of the next two years are likely to be a booster to the economy and the jobs market.

What are the goodies which the budget can realistically address?

1. Removal of LTCG (Long-Term Capital Gains)

Removal of LTCG can aid disinvestment. The market sentiment is likely to get better and the government can obtain a better price for family silver. This can address the fiscal issues and help the government use the spend for building the nation’s roads, ports and emerging areas like water logistics.

2. Introduction of infrastructure bonds

The business of infrastructure is a capital intensive business where the challenge as always is a continuous need for capital. As per past experience infrastructure bonds interest being tax-free can help the government sustain a balanced approach to growth while keeping the fiscal deficit in control.

3. Promotion of REITs (Real Estate Investment Trust)

Real estate investment trusts popularly known as REITs—making the interest proceeds tax free—can go a long way in fixing the funding gap of realty companies in the commercial space arena. This can create an environment where at the minimum further stress is not experienced by the sector.

This can also act as a driver of growth by creating more jobs as real estate is a people intensive business.

Also read: Current state of real estate


4. Further recapitalisation of banks

The recovery on account of insolvency and banking code is slow as necessary clarity at the policy and execution level has just begun to show results. This may require further capitalisation of banks to support growth as economic growth depends on credit off take.

Already the government has initiated mergers of banks, however a focus on mergers initially at least creates slow decision making as is evident on the ground. A further boost to capital through government infusion at this stage would help them realize better dividends over the longer term once the integration within the merged banks is completed.

5. Change of tax slabs

It has been recommended that tax slabs for personal income tax be changed by various industry chambers. It is less likely at this stage although welcome if it happens. This can maintain consumption and improve the focus on discretionary items.

One of the key recommendations for GST is sticking to three slabs instead of the four currently. If the change happens service industry is likely to get a boost and make an impact in terms of job creation as well. The other sectors will take time to show a bounce back in terms of job creation and demand.

These initiatives in my opinion can bring back the momentum in the economy.

Also read: Tax saving tips for small businesses in 2020


Image source: shutterstock.com

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