IN THE NEWS

Budget 2017: Key expectations from the FM
Published : Jan 17, 2017 - FORBES INDIA

Ritesh Agarwal, Founder & CEO, OYO
"The Government’s focus on speedy implementation of digitalisation supports long-term economic growth. All eyes are now on the Union Budget for clarity on taxation policy and regulatory issues, and fixing norms for the credit guarantee scheme. We hope to see supportive policies for the Travel & Tourism sector. 

Infrastructure development is a pre-requisite to provide the much-needed impetus for the industry’s growth. Additional incentives should be provided for infrastructure investments in the travel and tourism sector to accelerate growth. A lower tax rate for hospitality business and lower rate of interest for real-estate development will ensure opening up of more supply for the nascent branded budget hospitality sector. This will be in line with supporting small owner-friendly policies, such as the exemption of service tax in the sub-Rs. 1000 hotel room category."


Anuj Puri, Chairman & Country Head, JLL India
• Clarify beneficiaries under Pradhan Mantri Awas Yojana
The government recently announced that interest rates of 3% would be applicable on loans of up to INR 12 lakh and 4% on loans of up to INR 9 lakh, under the Pradhan Mantri Awas Yojana (PMAY). Now that two new income categories can avail higher loans with interest subsidies, we expect some more clarity on actual definition of beneficiaries who can avail of these benefits. For example - would young urban professionals hoping to buy their own apartments but not belonging to either the EWS (Economically Weaker Section) or the LIG (Low Income Group) segments be allowed similar subventions? Also, affordable housing is largely available in the fringe areas of metros and tier-II, III cities. Would certain redevelopment projects within the metropolitan city limits – and meeting the affordable housing definition – be granted similar benefits?

• Bigger income tax incentive for first-time home buyers
First-time home buyers were given additional INR 50,000 tax exemption in the last Budget for a house worth upto INR 50 lakh with a loan of upto INR 35 lakh. This announcement mostly benefited end-users in tier-II, III cities but not as many in the bigger metros where housing is largely above this specific limit. Can the upcoming Budget bring in similar tax exemption for first timers in the metros too? A higher limit specific only to the bigger metros can be introduced.

Also, can middle class youth buying their first house in an affordable project get additional income tax incentives for at least five years? Given the lack of institutionalized rental housing in Indian cities, such a move could spur many fence-sitters into moving out from their rented apartments into owned houses. It could also make developers come up with products suiting this segment. 
In the previous Budget, no financial protection was offered to end users against project delays. This Budget can extend tax rebates in cases where projects get delayed due to bona fide reasons. All these efforts can help the government move closer to its dream of ‘Housing for All by 2022’.

• Provide higher tax saving on housing loan and house insurance premiums
The government should increase the tax deduction limit for housing loans, especially for buyers in metropolitan cities. The current limit of INR 2 lakh is insignificant given the ticket sizes in cities, especially in bigger metros like Mumbai, where an overwhelming majority of the available housing is priced at, or above, INR 1 crore. 

The tax exemption limit should be auto-set to match inflationary trends in a financial year. Also, tax concessions on house insurance premiums could be introduced to encourage end users to insure their homes.

• Provide clarity on GST
While the GST (goods and services tax) structure was announced last year, the real estate industry is waiting with bated breath to see which tax rate is applied to the real estate and construction industry. What would happen to the abatement scheme allowed under the service tax regime? Currently, developers and home buyers can obtain service tax benefits under the abatement scheme. 

In case of an under-construction flat purchase, an abatement of 75% is allowed, subject to the flat being less than 2,000 sq ft and sold for less than INR 1 crore, taking the effective tax rate from 15% to 3.75%. If the two conditions are not met, the abatement is reduced to 70% and the effective tax rate to be borne by the home buyer increased to 4.5%.

If, however, abatement rules do not apply under the GST regime, the applicable tax rate would shoot up drastically. Moreover, developers would have already paid service tax and VAT for procurement of goods and services for their properties currently under construction. Will they be allowed to claim credits for input tax paid? Clarification would also be needed on whether credit for input tax would be allowed if the composition scheme has been availed by developers.

• Ease tax reporting and tax slabs
With its maximum governance mantra, the government can look at easing the tax reporting structures. Also, the benefits of demonetisation exercise should be passed on to the common man through easing of tax slabs and offering a higher degree of rebate. With the earlier stated intention of reducing corporate tax as well, the idea is to widen the tax net while simultaneously reducing actual tax incidence. 

• Raise house rent deduction limit
Salaried persons get house rent allowance (HRA) as a component of their total salary, and can therefore claim a substantial deduction in cases where the salary and its HRA component are higher. However, a salaried person without any HRA component or a self-employed person or those who draw lump sum pays without an HRA component can only claim a maximum deduction of INR 5,000 a month under Section 80GG. The Finance Minister can make this limit more realistic and bring it in sync with today’s housing rents.

Shashank Dixit, CEO , Deskera

Cashless Economy :
This is  one of the most crucial budgets in India’s economic history since 1991, coming as it does on the back of demonetization. The success of the cashless exercise hinges substantially, on the ability of the SME sector, which is the backbone of the Indian economy and employs around 40% of India’s workforce, to go cashless. Otherwise, this bold move will not succeed,  as the bulk of transactions are carried out by small and medium enterprises in the country and they must see cashless as a viable alternative. We look forward to the Union Budget 2017 for creating a favorable business climate for SMEs in India to thrive.

Cashless and technology : 2 sides of a coin
The success of the government’s demonetisation exercise would depend on the adoption of cloud technology. There can be no cashless unless there is technology to support it. The gaps in implementation would have to be bridged through technology. Through the Union Budget 2017, the government will have to ensure that the technology to digitize India is in place, or else the initiative would not have the desired impact. The government must incentivize the adoption of cloud technology to make cashless a success.

C's that define the budget :
This most significant budget of all times revolves around three C’s: cashless, cloud, and centralized tax, i.e., the GST. The success or failure of demonetization and the GST rollout would depend on the adoption of cloud technology, as it is the only technology which can be utilized on the go. Union Budget 2017 must be forward looking in these aspects. At the end of the day, SMEs of India would decide the fate of the cashless economy and therefore the government must seek to create a favorable environment for SMEs in India. I look forward to a SME-supportive Budget for a robust economy.


Mukesh Butani, Managing Partner of BMR Legal analyses the key tax reforms in the country, reduction in corporate tax rates, administrative measures to deal with demonetisation impact & base erosion and profit shifting (BEPS), and amendment of important treaties. He also provides a perspective on sectoral impact including roads, railways and renewable energy.

Rajeev Jain, CFO, Intex Technologies Ltd 

“The mobile handset industry is the fast growing Industry and has become an imperative part of our everyday life. India is moving towards a digital economy and mobile banking. Smartphones will play a crucial role in supporting this vision. The recent demonetisation reform by the Government has further laid the ground for setting a cashless economy.  The entire country is looking forward towards mobile banking which shall create a new user base and fuel the growth in mobile Industry. As an industry, we expect a long-term and stable policy on mobile manufacturing in India. The industry has huge potential and can supplement government initiatives of ‘Make in India’ with highly technical product if focused. Incentives to create sufficient technical manpower will lay the foundation of a strong and robust manufacturing base in India. Further, a clearly laid out research and development policy is necessary to succeed in a highly technical industry like ours and will help bring component manufacturing base in India to save precious foreign exchange.  In the end, to create a truly inclusive digital economy, affordable mobile handset or consumer durable items up to certain value should be given a concessional duty treatment.”

Archit Gupta, Founder & CEO ClearTax.com
The government has made attempts to popularize NPS but it is still unclear how withdrawals from TIER II accounts of NPS will be taxed. Investments in TIER I accounts are eligible for tax deduction, and investments can be withdrawn post retirement. There are no restrictions on withdrawals from TIER II investment account. So we hope the government will clarify how these will be taxed.

Additional tax benefits on home loans was announced under section 80EE in last year’s budget. One of the eligibility criteria was that loan must have been taken during FY 2016-17, we hope the government extends this deduction for loan taken in FY 2017-18 and FY 2018-19 as well. This will help further government’s commitment to affordable housing for all.

While claiming tax benefits on home loan, one of the prescribed conditions is that the construction must be completed within the specified time limit. In the last year’s budget the government extended this time limit from 3 years to 5 years. However, the time limit available for construction of property, for availing exemptions under Section 54 and 54F against long-term capital gains, remains at 3 years. The government must extend this period to 5 years as well. So those who invest in an under-construction property from capital gains, have 5 years from the date of the sale of the asset to avail exemption.

NRI taxpayers usually have to engage someone back in India to file their tax returns. These taxpayers face issue while verifying their tax return. Most of them have to send the physical ITR-V. The government must allow some form of digital verification of tax returns to NRI taxpayers as well.

Vivek Gupta, Partner, BMR Advisors 
analyses the measures to enhance India’s digital ecosystem, use of analytics and rewarding the honest taxpayers. He also provides a perspective on tax incentives for increasing employment and the road map ahead for Indian economy.

Harshvardhan Lunia, Co-Founder & CEO of Lendingkart Group, 

"I believe most of the SMEs in India are still facing funding shortage at their 'required time' and thus, are not able to scale up to their true potential. Being part of the SME lending ecosystem, I am looking forward to get this sector supported by an efficient policy framework. I expect the budget to incentivize lenders to create fast, easy and reasonable loan options for SMEs across the country. Recently, the government has announced extension of  credit guarantee limits of SME loans to INR 2 crores and extending the same to loans disbursed by NBFCs. It is a great step considering lot of new-age alternate SME lenders will also get covered under this scheme and increase penetration into this segment. To attract larger institutional players and create liquidity for SME loans, the government could possibly provide an institutional framework akin to bank in a box systems. SME loans, individual and pooled, could be recognized as a separate asset class and listed accordingly."

Gokul Chaudhri, Leader, Direct Tax, BMR & Associates LLP analyses the measures to tackle the impact of demonetisation, key tax proposals related to tax rates, curbing black money, initiatives on base erosion and profit shifting (BEPS), general anti-avoidance rule (GAAR) and place of effective management (PoEM). He also provides a perspective on key tax policies and reforms including GST to improve investor sentiment and help create jobs in India.

Rajiv Srivastava, Managing Director, HP Inc India

“Technology has been at the forefront of India’s recent economic growth and digital transformation, and in technology lies the answer to many of our real life problems as we strive to become a developed nation. To this end, with the upcoming Union Budget 2017-18, the Government should look at rolling out initiatives to boost adoption of technology for education, skilling, manufacturing and infrastructure development that are key to India’s growth story. For the digital empowerment of citizens, the Government should look at making technology more affordable and introducing initiatives to encourage PC buying in the country. Government needs to create conducive environment and support eco-system where we have at least one PC per family as a means to accelerate technology proliferation and migration towards a digital economy. While the relaxation of FDI and the introduction of several initiatives have helped citizens embrace economic transformation and digitization, additional initiatives to boost domestic manufacturing will also help them adopt technology in its most tangible form.

On the business front, IT manufacturers are bracing themselves for the implementation of the much anticipated Goods and Services Tax (GST). The Government’s objective should be to enable this transition from the current taxation system as smooth and orderly as possible — both for itself and for businesses and consumers. It will be important to outline a roadmap for IT manufacturers for the implementation of the new GST policy well in time.”


Mahesh Jaising, Partner, Indirect Tax, BMR & Associates LLP analyses the next steps for GST, India's biggest tax reform, with focus on customs law and changes in excise and service tax. He also provides a perspective on government’s ‘Make in India’ initiative to encourage manufacturing in India.

Pradeep Cholayil, MD & CEO, Cholayil Ltd.

The FMCG sector in the country has seen challenging times over the past few years, but the serious players have managed to find growth despite the market conditions. The shocks of demonetization are temporary at best; it is only a matter of time before businesses, both small and big, reorient themselves to the new realities. While this sector has seen destocking in the value chain –particularly in some of the cash dependent markets, our primaries are healthy, thanks to our strong brand equity

We strongly believe in Prime Minister Modi’s vision that “India can be a leader in making affordable, holistic health care available to the world”. The anticipation from the general budget is to have a very rational GST rate regime for this sector to incentivize sectoral growth, making sure that end consumer price is not impacted. Thanks to the upsurge in consumer buy of body care products with ayurvedic ingredients, most FMCG companies have in the recent past entered this category.  The expectation from the budget is that such products with Ayush ingredients be GST taxed at a significantly lesser rate; the announcement for this can be built in as a part of the Hon. Finance ministers’ speech, and rolled out when   the GST regime kicks in.

It will also be very good if there is a specific boost to the ayush/natural ingredients manufacturing akin to tax holidays that are extended in some of the manufacturing sector. Ayurveda-based FMCG manufacturing EOU parks can be promoted to give a boost to the exports, and encourage players who have a strong product portfolio in the space.

Given the renewed interest in the ayurvedic health-care space, the Finance minister may also look at providing a broad based regulator for the space, in the line of FSSAI for the food products. This will go a long way in preventing unscrupulous and non-serious players misusing the Ayush name for quick gains in the market. It will also encourage the existing players who have made handsome investments over the years into developing products with a significant R & D spend.


Ayush Lohia, CEO, Lohia Auto Industries
"At present, demonetisation has created unfavourable environment for the auto industry on the whole. The auto industry is pinning hope on the upcoming union budget 2017 as it will uplift consumer sentiment and infuse positive environment for auto industry including the electric vehicles.

Auto mobile industry players are working toward extension of the incentive scheme for electric mobility under the FAME scheme and hoping for a positive response from the upcoming union budget with a long term plan for atlteast  next five years. This extension will lead to achieving India’s electric vehicle target which in turn will undoubtedly help in reviving of the industry.

The government had launched the FAME India scheme in 2015 with an aim to encourage eco-friendly vehicles. It predicted Rs 795 crore support for the first two fiscals. Faster adoption and Manufacturing of Hybrid and Electric vehicles in India (FAME India) falls under National Electric Mobility Mission Plan.

The industry is also expecting that GST will come in effect from April 1 as far as the taxation side is concerned.  GST as we all are aware will bring good news for all the companies in the manufacturing sector owing to the expected benefit so again cheers to the electric vehicle industry!

Those companies who are locally manufacturing vehicles can expect benefit because of cost advantage due to lower taxation. GST will uplift the electric vehicle industry on the taxation front as it will soak up many of the currently levied state, central government and local body taxes.

On the whole cost of manufacturing vehicle will be reduced by easing off the cascading effect of tax-over-tax. This easy and consistent tax structure will simplify the way of doing business for those in the manufacturing industry. As far as the electric vehicle industry is concerned the suppliers, manufacturers, dealers and particularly the customers who will get the utmost benefit.

Furthermore, GST will transform India into “one market”. Government will infuse a positive spirit in the economy and bring in a lot more efficiency in operations as compliance burden on the whole will reduce.  From the prospective of Indirect tax the entire country will be perceived as 'One Market' which will lubricate operational competence.

GST is extremely beneficial as far as electric vehicle industry is concerned. The industry as a whole is appreciating the Government of India and political parties for carrying the GST baton and taking it forward.  Implementation of GST will fuel the growth of electric vehicle industry. In the current scenario, some states are still charging heavy taxes on electrical vehicles where as some states are charging around five percent. Considering all goes well, it is expected that GST rate should reduce the total tax burden on electric Vehicles. Under this favourable climate, the GST rate is expected to be in the lowest possible slab.

Additionally, focus on infrastructure development and government initiatives for development and promoting of electric vehicle will also create promising environment for this industry."


Bhavin Turakhia, Co-Founder and CEO, Directi
“2016 saw a slew of announcements made by the government. With the goal of putting our country on the path towards a cashless economy, the Union Budget 2017-18 should include definitive SOPs and tax rebates to encourage and boost e-payments. Moreover, to achieve the goal of financial inclusion, the government should also rationalize indirect taxes and charges levied with respect to digital payment transactions, and further incentivize companies operating within this space. To adapt to the need of time, government should also rationalize income tax provisions including provisions related to employee tax benefits such that payments/ documents in the digital medium are treated at par with physical instruments. 

As a natural corollary to the demonetization process, the time is ripe to increase the tax exemption limit and also the corporate tax limits. Steps should also be taken to help startups tide over its immediate effects. Furthermore, with the increase in cash flow within banks, advanced technological infrastructure will help facilitate seamless transactions and improve the overall banking system as we enter into the new financial year.  

A startup hub, India is currently home to the third largest number of technology driven startups in the world. The previous year witnessed multiple markdowns in the country’s startup ecosystem and, therefore, to propel this forward, the PM’s flagship ‘Startup India’ project should receive an impetus in the upcoming budget.”


Shubh Bansal - Co-founder and Chief of Marketing & Growth at Truebil
"The Union Budget will undoubtedly be of great importance to the automobile industry. As 2017 was a shaky year for the automobile industry due to demonetization, the industry is still trying to cope up with the situation. The auto industry pins hope on the budget to boost consumer sentiments. There are expectations that government will increase the disposable income. There are greater chances that the basic income tax exemption limit may be increased to at least INR 300,000 per annum.
 
The Government should take into consideration Tax reduction, which will help double the sales by mid of this year. The GST regime is expected to subsume the multiple accesses, levy and rationalize the tax rates. The industry would expect that the Budget would be a precursor to a simplified tax regime. Apart from that implementation of GST and low tax slabs, tax rebate not just for consumers, but also for NBFC s providing loans to car buyers, increase in disposable income, excise duty reduction would boost the automobile sector."

Tulsi Tanti, Chairman and Managing Director, Suzlon Group

The renewable energy landscape both in India and globally, is undergoing significant transformation. With over 28 GW wind energy, India today is the fourth largest in terms of wind installed capacity. We see the demand for clean, sustainable and affordable power continuing especially in emerging markets. India’s commitment at COP21, to reduce 30% to 35% carbon emission and increase renewables to 40% of the energy mix by 2030 will continue to give impetus to incremental demand for renewable energy. 
The wind energy sector can easily achieve the target of 60 GW by 2022, and also harness the export potential of 10 GW (~ USD 10 billion), if the following recommendations can be considered in the upcoming Union budget. 

The expectations from the Union budget 2017 are:

1. Continuation of Accelerated Depreciation & Section 80 IA for Wind Operated Electricity Generators (WOEGs)

 There is a fair amount of Indian capital that has and is investing into wind energy projects, because of presence of Accelerated Depreciation. Most of these investments come from the manufacturing sector in India, which utilises renewable energy for their captive consumption, so that they hedge their energy costs
 In a typical process industry i.e. textile, energy consists more than 30% of their operating costs, if such industry invests into renewable energy, the energy costs dips to less than Rs 1 per kWh after 6-7 years, making them competitive and profit making.
 In order to continue the impetus for Make in India and make it successful, AD should be allowed to be continued
 Further, with presence of MAT, and removal of Sec 80 IA, would make the energy costs higher than today, so Sec 80 IA needs to be retaine

2. Incentive mechanism for State DISCOMs to procure wind energy 
• There is a requirement to incentivise state DISCOMs to meet the RPO compliances, today, there is no such mechanism 
• MNRE, recently floated a paper to extend Performance Based Incentive (PBI) to the tune of 62 paise/kWh to DISCOMs, which is a very good move, should be implemented  

3. Generation Based Incentive (GBI) should be continued to maintain the growth momentum and to achieve the target of 60 GW by 2022

4. “Zero” rate GST for Wind Operated Electricity Generators (WOEGs)
• Renewable energy products currently are excise exempt, and currently electricity duty is kept out of GST, because of which the entire GST chain breaks while producing electricity, if not corrected would lead to increase in cost of generation anywhere between 30 – 50 paise/kWh 
• Since, it is important to contain or reduce the cost of generation, best would be to peg GST at 6% slab (revenue neutral) or best to be at ‘zero’ rate, which would reduce cost of generation , making renewable energy most acceptable to DISCOMs and end consumers  

5. Concessional finance/interest subvention for manufacturing sector that invests  in wind energy for captive utilisation 
• An interest subvention of 5% should be given to such manufacturing units that invest into wind energy for captive utilisation. 
• This is to give impetus to ‘Make in India’ and make manufacturing sectors in India profitable, which are currently under tremendous pressure for margins due to high interest rate and energy costs.
• Investment in wind energy hedges their energy costs on a long term basis, making them more competitive at the global level. This will lead to increased exports and manufacturing. 

6. To make India a global manufacturing hub 
• It is important to make raw material exempt from customs, and have higher tariff for import of finish goods, in order to make India a global manufacturing hub for Renewable energy
• Exemption of customs would create a right environment for manufacturers to set up their facilities in India and help achieve the country’s ambitious target of 175 GW.

7. Export subsidy (logistics support) for wind energy sector
• India has tremendous potential for exporting Wind Turbines to overseas geographies. Till date India has exported more than 7,000 MW of wind energy projects across the world. 
• We need to have time-bound logistics subsidy (starting from 10% of the sale value to “zero” over a 5 year period), then it would be possible to achieve an export of 20 GW by 2022, which will not only earn forex for the country, but also further enhance the ‘Make in India’ vision. 

The Union budget needs to focus on giving a boost to the renewable energy sector, enabling energy security for the nation, facilitating a low carbon economy and providing sustainable and affordable energy for all.


Girish Vanvari –Partner and Head, Tax at KPMG in India
With the Union Budget 2017 set to be presented on 01 February 2017, expectations of stakeholders are already riding high. The expectations from the Budget range from the announcement of some big-bang reforms, to ironing out the existing creases in the provisions, bringing further ease in carrying out compliances, reposing further investor confidence into the system etc.

POEM* and CFC    
During the FY16 Budget, the implementation of the provisions of Place of Effective Management (POEM) was deferred to April 2017. Owing to the non-issuance of final guidelines in this regard, there is uncertainty around interpretation and application of POEM effective April 2017.  There are talks about introduction of Controlled Foreign Companies (CFC) regime in India similar to ones already in place in several countries.  Generally, CFC regulations aim to isolate the passive (non-business) income of the foreign company and subjects only such income to be taxed in India.  It will be interesting to see whether POEM will be further deferred till final guidelines are issued; or well-drafted CFC regulations would replace the POEM provisions.
(* As provided under Section 6(3) of the Act)

ICDS**
The government announced deferment of ICDS for 1 year to be applicable from April 1, 2016 instead of April 1, 2015. Recently, CBDT has notified revised ICDS on September 29, 2016 and repealed its earlier notification in this regard. There are several ambiguities in the implementation of ICDS provisions. Also, ‘Corporate India’ is already under several transitions (flowing from the New Companies Act, introduction of Indian Accounting Standards (Ind-AS) and various other policy announcements).  Given the complexity in interpreting and implementing ICDS, several representations have been made on overall scrapping of ICDS.  In these circumstances, it would be appropriate to at least defer, if not scrap, the application of ICDS for a reasonable period of time so as to be in a better position to comprehend the scope and reach of ICDS. 
(** As provided under Section 145 of the Act read with CBDT notification No. 87/2016 dated September 29, 2016)

Equalization Levy
The FA, 2016 introduced Equalization Levy (EL) on certain specified services being in the nature of online advertisement. However, there have been certain issues such as availability of foreign tax credit, scope of the term ‘online’ advertisement, etc. The government through Budget 2017 is expected to provide clarification on such issues. Also, there is a speculation that for the purpose of levy of EL, the scope of specified services may be widened to include digital transactions other than online advertisements.
Incentivizing cashless economy

The government could also announce measures to encourage cashless economy to put a check on the black money generation after demonetization. A number of incentives have already been introduced to promote electronic payments such as discounts when using cards at toll booths and petrol stations, waiver of service tax on payment of transactions upto INR 2000 through debit/credit cards, etc. The government in its Budget 2017 may introduce additional benefits for digital payments such as friendlier tax rates.

Tax rates
During the FY15 Budget speech, the government expressed its intention to lower the corporate tax to 25% over next four years along with corresponding phasing out of exemptions and deductions. A beginning was made last year with companies up to INR 5 crore turnover levied tax at 29%. The budget is likely to move the corporate tax rate closer to the desired rate of 25%. With the reduction of corporate tax rates, an appropriate reduction in MAT rates from the current levels of 18.5% is also being looked at. 
It is expected that the personal tax rates may also be softened either by enhancing the basic exemption limit or by reducing the personal income tax rates attached to the current tax slabs. 

Parting thoughts
With all hopes pinned on the Budget announcements, expectations are soaring high. It will be interesting to see how the Finance Minister maneuvers this balancing game of meeting the expectations of the stakeholders on one hand and scaling up the growth and progress of the country on the other.

(All views and opinions expressed herein are those of the author and do not necessarily represent the views of KPMG in India.)

Vipin Sondhi, MD & CEO, JCB India Ltd.

“The importance of the Infrastructure sector in the overall progress of the economy is critical. The Government has given considerable impetus to this sector including in the last two budgets, where significant allocation to this sector was committed. Owing to this focus, the earthmoving and construction equipment industry witnessed a noteworthy revival last year.
 
This momentum needs to be sustained through concerted policy efforts towards an increase in private investment along with continued public expenditure.
 
Apart from Roads and Highways, focus on the key sectors such as Railways, Irrigation, Mining and Real Estate will lead to sustained growth of the infrastructure industry.”


Arun Singh, Lead Economist, Dun & Bradstreet India
“There is considerable anticipation about how the government will articulate the Union Budget for FY18. This time the Union Budget will be markedly distinctive from the earlier budgets mostly because of the three major changes that it will imbibe - Merging the Railway Budget with the Union Budget, discarding the traditional expenditure-reporting format under the broad categories of Plan and non-Plan expenditure and preponing the budget date. Further, the Union Budget requires to be drafted, prudently, in the framework of demonetisation-induced shock to the economy, the uncertainty over the pace of domestic growth especially rural economy, heightened risks to global growth recovery, firming-up of global commodity prices and the delay in implementation of GST. 
 
Given the above scenario, there arises a lot of uncertainty and raises more questions rather than expectations. How will the government manage to combat the overall slowdown in demand, especially in the rural segment, and create the much-needed employment? In terms of allocation, will the segments/sectors impacted by demonetisation receive greater focus and limit the possibilities of any major initiatives? Given the moderation in the projection of Indian economy, will the Union Budget be tilted towards populist or reformist measures? Can we expect the Union Budget for FY18 to pave way towards increasing disposable income by providing some relief under personal income tax? These are some of the questions that we would seek answers to in the upcoming Union Budget.
 
We anticipate that the Union Budget for FY18 would be devoid of any major or big-bang reforms/initiatives as it is likely to focus on hand-holding the implementation of the many major initiatives already taken and assurances made by the government earlier. In a way, the government has been making a serious attempt to bring the Union Budget closer to what it essentially is - a mere accounting and allocation exercise - while making reforms an on-going year-long process. 
 
When the earlier growth projections were framed, favourable monsoon, implementation of 7th pay award and transmission of policy rate cuts to the borrowers were expected to fuel the consumption demand in FY17. However, the demand shock posed by demonetisation derailed the consumption growth story especially in rural areas. In such a scenario, expectations are high that the government might announce various measures and increased allocation in the agriculture and social sector.
 
The sectors catering to the rural demand could receive additional sops/benefits. Besides the rural sector, overall consumer sentiment needs a push. The push to consumer demand could be given either, directly by increasing the disposable income by altering the tax exemption limits (progressively taxing the higher income groups) or indirectly by making the consumer goods segment or services more affordable. Further, both demonetization and GST has and will have in the medium term a profound impact on the largely un-organised MSME segment in India. Hence, the budget is expected to announce some initiatives or exemptions to the MSME segment.
 
The other important segment, which would need emphasis, is the infrastructure sector. The investment activity needs to be accelerated to support growth which is expected to have been considerably affected by demonetisation. Thus, the prerogatives would be not only to increase fund allocation to various schemes/initiatives, but also to ensure effective utilization of the funds allocated and fast track the execution of the various infrastructure projects. Moreover, railways are likely to draw significant attention in this space.
 
Increasing the revenue collection both from direct and indirect tax in the ensuing year would be crucial. While demonetisation was a push (involuntary) which forced people to declare their taxable income, combining it with a voluntary compliance mechanism for declaration of taxable income would make the entire method of increasing the tax base more robust. The government would be relying on GST for indirect tax collection. However, the near term is likely to be challenging with adjustment costs for the private sector (coping with inter-sector implications of new tax rates), and the Central Government (trying to compensate states for revenue loss).
 
Under the fiscal consolidation roadmap, even as the government remains committed to reduce fiscal deficit to 3% by FY18, any slippages in budgeted disinvestment, rise in global crude oil price, need for recapitalization of state-run banks and slowing economy could pose considerable challenge to the Central Government”.