Banking on Budget: Hope and reforms amid pandemic and fiscal deficit

 

The government has taken laudable steps to support and propel the economy in these difficult times, but a lot more still needs to be done, writes Vikas Vasal

The ongoing pandemic and the resultant lockdown(s) have caused massive disruption in businesses and sent shockwaves around the world. India is no exception. The government has taken laudable steps to support and propel the economy, but a lot still needs to be done. Against this backdrop, the finance minister, in the upcoming Budget, will try to further boost the economy towards its pre-pandemic growth level. Here are some points for consideration for Budget 2021.

Maintain status quo on income-tax rates

Keeping in view the fiscal deficit, increasing tax rates in some shape or form is likely to be on the cards. It is pertinent to note that almost every section of the society has borne the brunt of the pandemic, be it large corporates, MSMEs, small vendors or daily wage workers. Savings and livelihoods have taken a hit, and many families are struggling to keep financially afloat. Therefore, it is desirable that the government refrain from increasing the tax rates or imposing additional surcharge and cess.

Additionally, to garner resources, probably time has come for India to speed up its disinvestment process, the seeds of which have already been sown: several announcements to this effect were made by the government during the pandemic.

Promoting investment and consumption

To boost infrastructure development, a deduction may be allowed for individuals for investments in long-term infrastructure bonds/projects, say for Rs 1 lakh. Besides providing the necessary funds, this would give an impetus to inter-dependent sectors like cement, steel, logistics, etc, and create large-scale employment for unskilled and semi-skilled workers.

To boost consumption, a one-time tax deduction of Rs 50,000 to Rs 1 lakh could be proposed for all individual taxpayers for expenditure incurred on travel and stay in India, purchase of electronics, white goods and vehicles manufactured in India. This single step would provide the much-needed impetus to the ailing hospitality industry and give a boost to ‘make in India’.