The agenda for this exercise would be to redefine fiscal consolidation and work to reach the target of 4.5% (fiscal deficit) from the current 6.4%.
Although the nominal GDP growth projection for FY23 has allowed some breathing room for deficits, no tax cuts will be incorporated considering the 2024 general election.
Still, existing tax policies will witness beneficial reforms. More attention will be paid to Capex and the quality of spending, promoting Capex allocation at the state level by offering various benefits.
Household savings have been declining (FY21 vs. FY22 at 15.9% vs. 10.8%) and should be encouraged, given the erosion of purchasing power due to inflationary pressures.
We will take significant steps to increase productivity in the real economy and will focus on improving rural jobs. Clear divestment targets would be better if there were strategic stake sales in a few companies rather than smaller divestments in more companies.
Capital allocation to drive growth and productivity and provide relief and inclusion to the base of the pyramid. Some reforms in the tax structure would include simplifying the tax policy on capital gains and introducing a uniform corporate tax structure (currently, different sectors in India are taxed at different rates of income tax. To position the India as a competitive hub for manufacturing and service industries, the introduction of a flat corporate tax rate would not only bolster the manufacturing sector but also allow the service sector to thrive, however, partner companies and LLPs are still subject to a flat rate of 30%). For individual taxpayers, an increase in the basic exemption limit, the 80C deduction limit, and the PPF limit will be sought.
The tax structure of PMS and AIF will be improved to attract investor attention and optimize profits.
The country’s education system witnessed many changes due to Covid; the government can focus on improving the structure and work to make education (spend) 6% of the country’s GDP and encourage states to implement NEP policies effectively.
India’s unemployment rate in India in annual terms ranged from a record high of 23.5% in April 2020 to a record low of 6.4% in September 2022, averaging 8.2% between those years. As of December, the unemployment rate is at a 16-month high of 8.3% and remains one of the major challenges this year; therefore the funds allocated for MNREGA would be increased in addition to schemes like PLI and
Shakthi that have the potential to create hundreds of jobs.
(The author is co-founder, True Beacon and Zerodha)
(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are my own. These do not represent the views of Economic Times)