June 01, 2023

Union Budget: What After 4-5 Mini Budgets?

By A Special Correspondent
First publised on 2021-01-30 02:31:14

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Finance Minister Nirmala Sitharaman is going to present the Union Budget in Parliament on February 1. Some indication about what shape the Budget is going to take was available from the Economic Survey and what the Prime Minister said recently.

Let us take Prime Minister Modi’s remarks first. He said that in the past year, there have been 4-5 mini budgets in the form of Covid related packages. That shows that there will not be many new schemes in the budget and the finance minister is likely integrate the said schemes in the overall budget.

Then, in the Economic Survey, it was mentioned that there will be a good increase in healthcare expenditure (which, given the pandemic conditions and the vaccine rollout, is necessary) and on infrastructure in the form of the already announced Rs 111 lakh crore from 2021 to 2025 under the National Infrastructure Pipeline (NIP) . The budget will allocate part of that in the coming fiscal. Apart from that, there might be measures to placate the farmers after their agitation although agriculture does need a massive investment in infrastructure in the form of integrated markets and cold chains.

The finance minister will also be looking to put money in the hands of the people. Hence, she might be looking to raise the standard deduction from Rs 50000 to maybe Rs 75000. Other rationalization measures might be undertaken in TDS and other tax matter. But one thing is sure - there will not be any major changes in exemption limits or tax rates. Corporate taxes were reduced last year and the government knows it takes two or three years for them to stabilize. Since the stock markets are on fire, there will be a temptation to earn more revenue from peoples' dealings in stocks and capital gains taxes might be tinkered with. 

But the government will have to find the money for investment. Although tax collection is picking up, the government is way behind in divestment targets and the money is simply not there. It would be interesting to watch whether the finance minister indulges in accounting jugglery or chalks out a way forward to generate the funds. For, in the end, investments can only be made if there is money in hand.