New Delhi: Finance Minister Arun Jaitley is facing a difficult task to balance the needs of the sector, farm and industry, when it presents its third budget on Monday, despite the fact that he is trying to raise funds for the promotion of public expenditure on higher growth against the backdrop of the global headwind.
The growth of rural distress due to back-to-back droughts is pressure on the Minister of Finance to allocate more funds for social schemes, while at the same time, he must return the foreign investors hungry for faster reforms.
His difficulties were composed of huge profits of Rs 1.02 lakh crore, it will be necessary at the expense of the 7 recommendations of the Commission for Pay for civil servants. How does this without prejudice to the previously announced target of reducing the budget deficit to 3.5 percent of GDP next year to see.
Jaitley also likely to deliver on the promise last year to gradually reduce corporate tax from 30 percent to 25 percent over four years. It is expected to implement the budget can start tomorrow, that may be accompanied by the abolition of tax privileges, to keep revenues neutral exercise.
To enhance the revenue to meet the cost increases, Finance Minister may require an increase in indirect tax rates or introducing new taxes. IRS has been brought to 14.5 percent last year, we can see on a trip to prepare for the level of 18 per cent provided for in the GST.
In addition, a new tax to fund initiatives such as the launch of India and Digital India and other programs reflect how CRP Swachh Bharata imposed last year.
On his agenda is also a revival of the investment cycle. While capital expenditure in the 2015-16 biennium increased by 25.5 per cent in the last fiscal, as a percentage of GDP is still stuck at 1.7 per cent and have to go up 2 percent.
He will have to focus spending on sectors such as infrastructure and the increase in public spending to private investment does not choose the right pace.
It remains to be seen whether Jaitley will loosen your purse or continue to consolidate. If the government decides to increase spending, it will be a challenge to ensure that funds are allocated for capital investments.
“Even if fiscal consolidation continues, the financial performance of India will remain weaker than rating peers in the near future,” analysts Investors Service Moody said earlier this month.
Foreign investors sold a net $2.4 billion in shares this year, the second largest outflow in Asia, excluding China.
The budget will have to focus on the raw materials sectors led by the provision of guarantees as these sectors are stressed due to the collapse in global demand and oversupply.
Jaitley shifted share infrastructure costs and subsidies in the last two budgets.
In addition to the implementation of the 7th Pay Commission, it is also faced with the problem of bank recapitalization.
Agriculture is not recovered from the drought and lower crop prices, the government is likely to keep the costs to a program of employment in rural areas, expansion of crop insurance and higher irrigation costs.
Reform, he can open more sectors to foreign investment and provide tax incentives for labor-intensive industries, such as leather and jewelry.