Service  Tax & Income Tax Consultants Bangalore, Accounting Services, Audit Firm in India.

Service Tax & Income Tax Consultants Bangalore, Accounting Services, Audit Firm in India.

Service Tax & Income Tax Consultants Bangalore, Accounting Services, Audit Firm in India.

Call Us : +91-7676887733
Email us : info@s3solutions.in

How Arun Jaitley’s budget is a step forward in the right direction : 12-02-2018


Finance minister Arun Jaitley faced adverse set of macroeconomic challenges as he presented Budget 2018. Revival of investment and kick-starting economic growth was underpinned by the need to invest in, and develop the fabric of, social infrastructure. Fiscal prudence had to be maintained with a keen eye on inflation.

Clearly outlining his intent that job creation was at the core of his economic policies, Jaitley unveiled a slew of measures to spur employment across sectors. The allocation of Rs 3,794 crore as credit support, capital and interest subsidy to the MSME sector is a clear recognition of its potential as an engine for growth. This will lead to a formalisation of the segment.

Increased formalisation will also make it more attractive for banks and financial institutions to partner with MSMEs. As a cascading effect, this will enable the former to push for better credit offtake and private investment at a time when credit offtake in the industry has been low due to overcapacity. Cutting of corporate tax rates from 30% to 25% for companies that reported a turnover of up to Rs 2.5 billion in 2016-17 will benefit around 99% of companies that file tax returns. GoI is expected to announce measures for effectively addressing non-performing assets (NPAs) and stressed accounts of MSMEs. This will enable larger financing of MSMEs and also considerably ease cash-flow challenges faced by them. The use of fintech in the financing space will also help the growth of MSMEs.

The broader theme of support for the rural economy comes in the form of the volume of institutional credit to the agricultural sector, which is expected to go up significantly to Rs 11 trillion, compared to Rs 10 trillion in 2017-18. In addition to a continued, if not substantially increasing, thrust from GoI’s own resources, this could aid growth in the agricultural sector in 2018-19.

By signing up for a slightly higher fiscal deficit than expected, a mild expansionary fiscal stance could put some pressure on consumer prices.

The FM also announced minimum support prices (MSPs) at a minimum of 1.5 times production costs for kharif crops. This could disturb inflation dynamics as well as skew production decisions against horticulture crops. Higher MSPs have added new risks to the inflation outlook for RBI’s consideration. The focus now shifts to RBI and its stance on the Budget and mounting inflation risks.

This Budget also sees a concerted effort towards widening and deepening of bond markets. With Jaitley encouraging large corporates to use the bond market to finance one-fourth of their funding needs, the corporate bond market space is likely to be widened.

Some sizeable economic gains are still low-hanging fruit, and continued reforms remain key to their realisation. For example, in exports, much more can be achieved by fixing sector specific issues instead of reaching out for exchange rate or more spending-intensive measures.

The focus on upgrading infrastructure continues, with investments to the tune of Rs 5.97 trillion in the next financial year. Moreover, the commitment towards developing the smart cities project will provide a fillip to real estate activities. Job creation and growth will receive a boost if GoI achieves its infrastructure spending target.

The highlight of the Budget, a universal healthcare programme, is a step in the right direction. The ushering in and development of digital platforms to smoothen processes across governance projects continues.

As the financial sector increasingly moves towards enhanced digitisation, we look forward to a stronger focus on aspects related to cyber security and protection of data.

The intent is clearly there. Now to translate it to action.

Source : Economic Times