Jaitley should contain fiscal deficit in Budget 2018: Noted economist

Arun Jaitley, GST council

Budget 2018

Finance Minister Arun Jaitley should try to achieve the fiscal deficit target and take more steps to implement projects efficiently in the forthcoming Budget, noted US-based economist T N Srinivasan has suggested.

Srinivasan, the Samuel C Park Jr Professor Emeritus of Economics at Yale University, further said there is no economic theory to link job losses to demonetisation and implementation of the Goods and Services Tax (GST).

“I expect him to contain the fiscal deficit as far as he can, take further steps to implement projects efficiently and on time,” he told PTI.

The government is aiming to contain fiscal deficit for the current fiscal at 3.2 per cent of GDP.

Jaitley is scheduled to present the Union Budget for 2018-19 on February 1.

Asked to comment on concerns in India about job losses due to demonetisation and GST rollout, Srinivasan, who at one point taught RBI Governor Urjit Patel, said, “There is no economic theory linking the two.



PM Modi indicates Budget may not be populist, open to more changes in GST

Prime Minister Narendra Modi

Budget 2018

With barely 10 days for the presentation of the fifth and final Budget of the current term of his government, Prime Minister Narendra Modi has indicated it might not be populist.

In an interview to the Times Now television channel, telecast on Sunday evening, the PM said he was open to more changes in the goods and services tax (GST). Its implementation was a collective exercise involving ruling and opposition parties; he accused those having termed it a ‘Gabbar Singh Tax’ of “insulting” Parliament.

The PM also rejected criticism of providing jobless growth, saying “lies” were being spread about employment generation and furnished data from a recent study to say seven million jobs have been created. However, he acknowledged farm distress. He said it was the responsibility of central and state governments to identify and address farmer issues.

Modi also pledged his government would stay the course on reforms that had pulled out India from being among the ‘fragile five’ economies of the world to being a ‘bright spot’.

In the interview, telecast on the eve of his leaving for Davos to attend the World Economic Forum meet, the PM said it was a myth that common people expected “freebies and sops” from a government. He was asked if the final full Budget of his government would be a populist one, given that the Lok Sabha election was nearing. “Those who have seen me as the chief minister (of Gujarat) and also as the prime minister (would know) the common man does not want all these things. It is a myth,” he said.

The common man, said Modi, expected honest governance, and his government was taking decisions to fulfil these needs and aspirations. Asked specifically if he’d resist populism in the Budget to be presented on February 1, he said it needed to be decided if the country needed to grow and become strong.

The PM also highlighted his government’s success in reining in the fiscal deficit. He said price rise had averaged three per cent annually in the past three years as against 10 per cent previously. Foreign investment inflow had more than doubled to $62 billion; the fiscal deficit has been brought down to 3.5 per cent of Gross Domestic Product from over 4.5 per cent, and the current account deficit had come down to one to two per cent, from four per cent.


Budget 2018 to bring income tax cheer? Here’s why this EY survey thinks so


Budget 2018

The government is likely to tweak income tax slabs and rates in Budget 2018-19 to bring down the burden on individuals, while there is unlikely to be any change in the current taxation of dividends, according to a survey by EY.

In a pre-Budget survey by tax consultant EY, a wide majority of 69 per cent of the respondents felt that the threshold limits for taxation would increase further in order to boost disposable income in the hands of the people.

About 59 per cent of the respondents were of the view that multiple outdated deductions would be replaced with a standard deduction in order to reduce the tax burden of employees.

The survey includes the views of 150 CFOs, tax heads, and senior finance professionals and was conducted in January.

About 48 per cent of the respondents said they expect the finance minister to lower corporate tax rate to 25 per cent but the surcharge would continue.

Most of the respondents (65 per cent) do not anticipate a change in the current taxation of dividends at this stage. About 24 per cent of the respondents feel that with a view to lowering the overall burden on the corporate sector, the government may lower the rate to 10 per cent.

“The pre-Budget 2018 EY Survey with business decision makers reveals a consensus amongst India Inc for stability and consistency in tax policies and a moderate tax structure. There seems to be little expectation of any major direct tax overhaul after the transformative introduction of GST earlier in the year,” EY India National Tax Leader Sudhir Kapadia said.


Budget 2018: Reeling under dwindling exports, AEPC seeks several relief

apparel exports

Budget 2018

Reeling from a continued fall in export growth and marginal refunds on the goods and services tax (GST), the Apparel Export Promotion Council (AEPC) has written to the government, seeking 12-15 types of relief. They want the duty drawback and the refund of state levies (ROSL) to be restored to pre-GST levels, and also exemptions from the new indirect tax for exporters.

Growth of apparel exports has clocked a negative 39 per cent, 11 per cent and 8 per cent, respectively, in October, November and December last year, according to H K L Magu, chairman, AEPC.

Now, in the run-up to the Union Budget, the export body has sought incentives from the government, to boost exports. It wants the duty drawback on cotton apparels to be restored to pre-GST rates of 7.5 per cent and the ROSL of 3.5 per cent. They also want to be exempted from 18 per cent GST for air freight.

After the GST roll-out last year, the duty drawback fell to 2 per cent; ROSL to 1.5 per cent on cotton apparels, and 2.5 per cent and 1.5 per cent, respectively, on different man-made apparels.

Till September, when the previous rates were applicable, apparel exports grew in double-digits. However, October onwards, exports began taking a hit.

We have been asking the government to support apparel exporters to survive. There have been blockages of funds between July and December; hardly anybody got GST refunds. Dollar weakened to be valued at Rs 63. We have become uncompetitive; Bangladesh has begun cashing in on this,” said Magu.

He added, “The government did take notice of the impact. Hence, in the mid-term review, the merchandise export incentive scheme was increased from 2 per cent to 4 per cent. However, more steps are needed to revive the industry.


Budget 2018: Easier GST to industry tag, will FM gift these to real estate?

Infrastructure budget 2018

Budget 2018

The year 2017 was a landmark one in terms of policy directives. The real estate market witnessed a temporary setback on account of reforms like Real Estate (Development & Regulation) Act (RERA) and Goods and Services Tax (GST). However, after withstanding the aberrations, the market now seems to be settling down to the changes, which are envisioned to bring long-term benefits. The New Year has started with hopes of a market revival, especially on the back of positive policy roll-outs in the upcoming Union Budget 2018-19.

Every year, the Union Budget presents an opportunity to the government to work towards the revival of Indian real estate and address the looming concerns that afflict various stakeholders. Budget 2017 doled out several benefits such as infrastructure status to the affordable housing segment and lower interest rates for loans up to Rs 12 lakh, but 2018 awaits resilient steps to kick start the recovery phase.

The Indian realty industry stands at the cusp of restoration and announcements of reformatory measures to address high land costs, unsold inventory and tedious approval processes are instrumental for the turnaround of the sector.

In 2018, stringent action is required for renewal. Certain initiatives towards reviving the sector are critical in the short term. Here are some of them:

* Industry status: This is a long-pending demand of the real estate sector which is considered vital for its expansion. Accordance of an industry status will extend subsidies and tax exemptions that are required to uplift the sector. Availability of easier and cheaper funds to the real estate developers will be a major booster for the market.

* Increase in tax shields for home buyers: The Budget session must look into the various sections of the Income Tax Act to extend support to homebuyers and boost real estate investments. Under Section 80C of the Income Tax Act, 1961, the government allows tax benefit on savings up to Rs 1.5 lakh. Principal repayment of completed homes qualifies for tax deduction under section 80C. Extending this limit to Rs 2 lakh or Rs 2.5 lakh could make real estate investment more lucrative.


FY19 growth at 7.1%, Budget unlikely to be populist: India Ratings

economy, business, India

Budget 2018

India Ratings and Research on Thursday projected the country’s economic growth to improve to 7.1 per cent next financial year from 6.5 per cent this year, buoyed by robust consumer demand and low commodity prices.

In its outlook for 2018-19, the agency said there will be a gradual pick up in growth momentum owing to structural reforms like GST and Insolvency and Bankruptcy Code (IBC) in place.

“While the implementation of GST is likely to benefit the economy over the medium to long-term, the same cannot be said about the impact of demonetisation,” India Ratings & Research (Ind-Ra), a subsidiary of Fitch Ratings, said.

Ind-Ra expects gross domestic product (GDP) to grow 7.1 per cent year-on-year in 2018-19, it said.

The projection is a tad lower than 7.4 per cent growth estimated by Asian Development Bank (ADB) and International Monetary Fund (IMF) for next financial year.

Ind-Ra said but for demonetisation and goods and services tax (GST) implementation, growth would not have decelerated to 7.1 per cent in 2016-17 and 6.5 per cent in 2017-18.

With the global crude prices firming up, Ind-Ra expects retail and wholesale inflation to come in at 4.6 per cent and 4.4 per cent, respectively in 2018-19, indicating an end to the current rate cut cycle.

There is still some fuzziness with respect to the intensity and the level of its future trajectory, it said, adding that the RBI “will remain in a pause mode for an extended period of time”.

The agency said it expects fiscal deficit in 2017-18 to come in at 3.5 per cent, overshooting the budgeted estimate of 3.2 per cent.

“Despite 2018-19 being a pre-election year, Ind-Ra does not expect the Union Budget to be a populist budget. However, it expects some expenditure reallocation with an increased focus on the rural and agriculture sectors,” it said.

The agency expects fiscal deficit in 2018-19 to be at 3.2 per cent, higher than 3 per cent stated in the medium-term fiscal policy statement.

A mix of global and domestic factors will keep the Indian rupee range bound at average Rs 66.06/$ in 2018-19, it said.


At pre-Budget 2018 meet, states flag drop in revenue on GST roll out

GST Council meeting

Budget 2018

At the pre-Budget consultations of Finance Minister Arun Jaitley with state finance ministers on Thursday, ministers representing state governments run by Congress, Left parties and regional parties flagged the revenue drop faced by states after the goods and services tax (GST) roll out and flagged agrarian distress.

Bihar Deputy Chief Minister Sushil Modi, who represented the Janata Dal (United)-Bharaitya Janata Party (BJP) coalition government in his state, demanded more central assistance for key schemes and revise wages for unskilled workers under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). He suggested the Centre advance the fiscal year to start from January 1, and increase income tax exemption limit from Rs 250,000 to Rs 300,000.

Punjab Finance Minister Manpreet Singh Badal asked the Centre to announce a farm debt waiver for the entire country on the lines of the one announced by the Congress government in Punjab.

Kerala finance minister Thomas Isaac flagged the revenue drop and resource crunch that state governments have faced after the GST rollout, which has impacted the socio-economic spending capacities of states.

Isaac said the Centre has increased central excise by Rs 8 per litre on diesel between 2015 to 2017, and reduced it recently only by Rs 2 per litre. He said none of the states have substantially increased the rate of tax on diesel. Isaac said that in this context it was “unfair” on the part of the Centre to ask the states to reduce the rate of tax when most of the states were faced with financial crisis because of uncertainties related to revenue that accrued to them on the implementation of the GST. He asked the Centre to strictly implement the anti-profiteering measures in the GST. He said any effort to bring stamp duty, one of the few taxes that states can raise, under the ambit of the GST would be “unconstitutional”.

Himachal Pradesh Chief Minister Jai Ram Thakur, representing the recently formed BJP government in his state, demanded that the Centre provide 100 per cent tax exemption for the first five years to industries set up in the state and 50 per cent for subsequent five years.