On February 1, Finance Minister Nirmala Sitharaman will be presenting her sixth Budget. The theme of the budget is likely to revolve around pumping more money into people’s hands, and tax slabs may change or standard deductions may increase as possible measures for realizing this goal.
There is a demand to increase the money that comes under the rural employment guarantee scheme MGNREGA and better farmer payment, according to PTI.
Women and fringe groups could get more concessional packages as part of Sitharaman’s attempt to prop consumption before the general elections, said experts cited by PTI.
As a rule, interim Budgets presented in the Lok Sabha before general elections do not introduce new proposals for tax or fresh schemes. During the interim budget, the government will require parliamentary approval to spend during the 4 months of the 2024-05 fiscal year.
It may contain measures to address short-term economic challenges that do not have the luxury of waiting for another four months when the full budget is presented after the formation of a new government. Experts claim there is an emergent need to respond in the economy that regards slack consumption demand.
In the case of FMCG and most products consumed daily, consumer goods companies have been raising prices in about 8-10 quarters on an increase in input costs, as stated by Rajat Wahi, a partner with Deloitte India.
Therefore, global supply chain impact, input prices increase, inflationary effect, and interest goes up all hit the lower income. As Wahi said, it is not only rural areas but also those poor segments of urban areas where people face these problems.
Wahi noted that the poorer section of society is feeling a bigger impact since there has been an increase in the number of loan defaults, he added.
Wahi added that the growth of agriculture has not been as anticipated by the government. The plan was to double agri income. We haven’t seen it yet because of inflation. Per the advance estimate of GDP growth, the agriculture sector is predicted to slow down from 4 percent in fiscal year 2023-2019.
According to India Ratings & Research Chief Economist Devendra Kumar Pant, the main objective of a vote-on-account is to permit spending money on salaries or wages, interest payments, and debt services for four months in the next fiscal period.
But, if there is a segment of society that has been under pressure, should we wait for 4-5 months to take any action? Maybe by doing nothing in the next five months, the situation may get worse.” By R. Pant said.
However, based on the IIP data for April-November showed that consumer durable output decelerated to 0.6 percent as compared with 5.3 percent in the corresponding period of last year.
Even though the consumer non-durables output increased to 5.6 percent during the eight months of 2023 against a favorable base as its output had declined by (-) 2.2 percent in the April to November period of a year ago
One of the means through which consumption demand can be boosted is via manipulating the new tax regime making it more attractive, thus leaving some cash in the pockets of taxpayers.
The issue of tax bracket rejig is always a question for contemplation in Budget… In the new regime, there could be pressure on the government to include deductions towards interest earned from home loans.
In any case, the government favors having as many people move from the old tax system with a high rate but various exemptions to a new regime that has a lower rate and fewer deductions for home loans, children’s education PPF contributions or contributed insurance premiums.
Apart from MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act), the interim budget is also supposed to provide funds for PM Vishwakarma Yojana and other government skill development schemes.
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