When the new finance minister steps into North Block, one of the first issues that he will have to deal with is raising more resources, given the BJP’s ambitious plan to expand some of the social sector schemes and the mega investment push announced in the party’s manifesto.
Although many are expecting a tax stimulus to revive demand, officials are virtually unanimous in suggesting that a tax cut is not an option that should be pursued, either in direct taxes or on the GST front. “Already, the target is stiff and a reduction will only make meeting the deficit target tougher,” said a senior official.
In its bid to show that the fiscal deficit target had slipped only marginally, the government left several bills unpaid, including those to the Food Corporation of India, whose borrowings have shot up. Instead, they are suggesting tightening the noose around evaders, especially related to indirect taxes. Given the political compulsions and teething problems of GST, officials have been complaining that they were unable to crack the whip on evaders. Already, data analytics is under way to identify those who have not been paying their dues.
The budget, which is likely to be presented in July, will be keenly awaited for clues to the government’s plan to step up consumption and investment in growth-boosting sectors such as infrastructure.
The government is expected to look at asset sales aggressively in the state-run companies space to raise much needed resources. The sale of Air India, which had to be shelved last year due to lack of appetite, will be a key task that the new government will undertake. Officials have already readied a comprehensive plan to complete the sale of the state-run airline in the current fiscal year.
The health of banks will be a key focus area for the Modi government, which in its previous stint had taken a number of steps, including enactment of the Insolvency and Bankruptcy Code (IBC) to nurse them back to health. Already the results are encouraging and the new finance minister is expected to build on the success, strengthen the process and get the wheels of lending roaring again. Bank consolidation in the state-run banking space is expected to gather strength .
The war against black money may also be accelerated and the move to shore up tax revenues will be pursued. After demonetisation, there has been an increase in tax returns being filed and the new government is likely to step up the efforts to boost compliance.
While the country’s economy is projected to grow around 7% and maintain its pole position as the world’s fastest-growing major economy, the Modi government is expected to unleash steps to revive growth in the major sectors facing a slowdown.
Coordination with the Reserve Bank of India is expected to emerge as a crucial factor and the report of the Bimal Jalan panel on using the central bank’s excess reserves will come in handy for the government in its fight to reverse the slowdown and spend in new sectors.
Source : PTI