New Delhi: Finance minister Arun Jaitley will present the last full budget ahead of 2019 general elections, most likely on February 1. The Union Budget 2018, which will be the first one in post-GST era, holds significance as this might be the last chance for the Modi government to showcase plans for its much touted economic reforms. Here is a lowdown on what Jaitley might have in his to-do list in the lead up to the big day:
1) Tax reforms: With the roll out of GST, the government has given a fresh coat of paint to the indirect tax structure. The finance minister and his team now have their eyes set on a rejig of direct taxes, including income tax. The government has constituted a task force headed by CBDT (Central Board of Direct Taxes) member Arbind Modi to review the existing tax rate and exemption norms. Sources said the plan is to have the draft legislation ready by the Budget before it is put out for public comments. The current government has in fact been consistent in its version that the tax base of the country needs to be widened and the tax rates rationalised.
2) Bank recapitalisation: On October 25, the government announced+ a mega recapitalisation plan worth Rs 2.11 lakh crore for PSU (public sector undertaking) banks. The move came with the motive to counter the mounting bad loans of state-owned banks. The package has created quite a flutter in the bond and equity markets also as Rs 1,35,00 crore of the announced amount will be in the form of front-loaded recapitalisation bonds. The government though, has yet not detailed upon the type of bonds or the interest rates on them. A recent report suggests that the government is likely to raise around Rs 70,000 crore by February 2018, a time frame which coincides with the budget. The RBI (Reserve Bank of India) has further suggested that the “process involves not just fund infusion but reforms of state-run banks as well.”
At a Ficci meet a few days ago, the finance minister categorically said, “Completing the unfinished task of strengthening state-run banks and resolving the bad debt problem is unquestionably one of the most important agendas on the table today.” With report of merger of ‘weak’ banks doing rounds, there might be a major reform pitch in Jaitley’s budget speech, as far as PSU banks are concerned.
3) Infrastructure push: During the above mentioned Ficci speech, Jaitley listed an impetus to infrastructure as yet another priority in the upcoming budget. “We have to keep the momentum going on infrastructure creation, including rural infrastructure. Therein lies the core of India’s future growth story,” he said, flagging areas such as railways infrastructure including trains and stations, urban infrastructure, water, housing and sanitation. He stressed that there is a need to “hurry up” on investment in railway infrastructure, including on stations and super fast and bullet trains.
The government has already approved the biggest ever highway development plan to develop and expand approximately 83,000 km of roads at an investment of Rs 6.9 lakh crore by 2022 under the Bharatmala project. It will be interesting to see how much of the proposed amount does Jaitley sanction in Budget 2018.