Finance Minister Arun Jaitley’s maiden Budget on Thursday is expected to be a tightrope walk of trying to meet demands for tax sops especially from the middle class and pursuing fiscal prudence to spur investment and growth.
The Budget for 2014-15 will be presented by the new BJP-led government, which rode to power on promises of providing relief to inflation-hit common man, amid falling growth, stagnating investments, high fiscal deficit and external crisis.
There are high hopes from the new government that it will raise tax slabs and also significantly hike the annual tax exemption limit to provide a much-needed relief to salaried class, which is reeling under the stubbornly high inflation.
For boosting investment, Jaitley is expected to announce tax incentives for industry. As a prelude to the Budget, the government has already extended the excise duty concessions for automobile and consumer durable sectors till December.
The Finance Minister is also expected to take a call on reducing duties on gold import, which were increased last year to check ballooning current account deficit.
He could also provide relief to farmers to help them tide over the impact of deficient monsoon which could lead to fall in agricultural output. The government may set up a price stabilisation fund, as promised in the BJP’s manifesto.
On the other hand, Jaitley, though not a hard-core economist, is expected to pursue the path of fiscal prudence and not sacrifice it at the altar of populism.
He has already indicated that the government will have to refrain from mindless populism.
“If you indulge in mindless populism you burden the exchequer…You convert yourself into a high taxation society. It does not work. Therefore, if you have to follow a path of fiscal prudence, (you should) have a certain amount of discipline,” Jaitley had said recently.
Setting the tone, Prime Minister Narendra Modi recently hinted at tough actions in the Budget.
“I am well aware that my steps may dent the immense love that the country has given to me. But when my countrymen would realise that these steps would result in getting the financial health back, then I will regain that love.”