As the name says ‘Budget’ be it household or nation, budget gives us the estimate of expenditure and revenues of a particular period of time. When a nation prepares its budget, it becomes Central Budget. Central budget gives an estimation to the people of that nation about the expenses that will be incurred in the coming fiscal year for its objectives and the revenues that is expected after the objective is fulfilled.
It is an Annual Financial Statements presented by the Government in Lok Sabha in the beginning of the year. It is an estimation of expected expenditure and revenues in the coming fiscal year. Before the implementation of this budget, Parliament has to pass the budget. The main objective of budget is to
- Increase economic growth by raising the purchasing power and improve the living standard of people. The growth in economy happens when there is increase in goods and services which in turn leads to growth in GDP of the country.
- Increase employment opportunities and increase social welfare schemes. Poverty and unemployment are the main problem of a nation. So, government should provide employment opportunities for poor and basic facilities like food, clothing and housing.
- Reduce the income inequalities between rich and poor. Government should decrease the inequality between rich and poor by levying taxes on high income group and granting subsidies to low income group.
- Allocating funds in social objective. Government should allocate funds in sectors where private sector does not come into scenario like public sanitation, electrification, education, health etc.
- Bring price / economic stability in the country. Government should control fluctuations in price by levying taxes and subsidies. If there is inflation going on then government should reduce its expenditure and if depression period going on then government should reduce taxes and grant subsidies so that the consumer spending increases which in turn can help the economy to come out of the depression.
- Finance and manage public utilities like railways, power and water.
Budgets are of three types:
- Balanced budget where in, the government revenues are equal to government expenditure.
- Deficit budget where in, the government expenditure is more than the revenues. There are 3 types of deficit also and they are Revenue, Fiscal and Primary deficit.
- Surplus budget where in, the government revenue is more than the government expenditure.
Central budget expectations 2019
As the date Feb 1st is nearing people from all the sectors are expecting a favourable budget from our Prime Minister. Finance minister and the Government is ready to present their final budget before the general elections 2019. Every individual, farmers and businesses are expecting big announcements in this budget. Expectations like Income Tax relief, 7th Pay Commission, change in section 80C limit, NPS rules and formalisation, farmer’s income guarantee and lot more in this fiscal year budget.
Minimum income support is expected for farmers. This will cost the government Rs 15 trillion both central and state combined but it is way better than loan waiver. Any scheme by central government is better than debt waivers. Farmers are expecting minimum income and various relief packages for them. Expecting government to announce measures to improve farmers income through transferring differential between market price and MSP.
Real estate sector expectations
This sector is expecting a reduction in the rate of GST from 12% to 5% so that the real estate gets a boost to under construction and ready to move in flats. Government’s Housing for All scheme also will benefit from this change. Real estate business is the largest and highest contributor of country’s GDP and is the fourth largest employment generator. If this sector is given industry status by the government then there can be overall economic growth as this sector can raise funds at lower rates. There should be organised and trustworthy mechanism in this sector. Single window for clearance at the state level would help this sector by saving time and improve overall efficiency of the real estate sector.
Education sector expectations
Government spending on public education and public health is less than 3% of the GDP. The government aspires to spend 6% in education but it’s still a long way to reach that percentage. This is expected to be highlighted in this budget. As it is the right of every citizen of the country to get basic health and education and government is accountable to provide it. Due to poverty and inequality in the country, education needs to be given importance so that the inequality and poverty can be eradicated. India is going to be youngest population nation so education plays an important role in improving the economy.
Expectation of start-ups and fintech companies
Start – ups are expecting a reduction in angel tax and MSME’s are also expecting a tax reduction for economic growth. Expecting reforms in regulatory framework of insurance sector so that this encourages the insurers to penetrate into rural market. Nearly 70% of population lives in rural areas so this reform plans can boost the vision of Digital India. It will also provide easy access to digital risk products.
Expectation of 7th Pay commission
Central government employees have been demanding for a raise for a long time. This budget is expected to address their minimum pay hike demand and fitment factor. They are expecting a hike in minimum pay to Rs 26000 from current Rs 18000.
Expectation of Income Tax exemption limit to be raised
Everyone is expecting the Income tax exemption slab would be raised from current 2.5 lakhs to 5 lakhs. If this happens then this will be great relief to middle class people. Around 5.43 crore income tax returns were filed up to Aug.31st 2018. This would benefit many taxpayers.
Expectation of unemployed or job seekers
Expectation of job seekers is that in this budget government should focus on employment opportunities or job creations. In the manufacturing sector government should focus and support its Make in India initiative so that it benefits the youth of the country and encourages them to start their business.
Expectation of NBFC’s
Expectation from this budget is that it should encourage ‘A’ rated NBFC’s for issuing retail bond to the people. The refinance fund of national housing bank should be increased. To help the middle-class home buyers for buying their dream home government should provide better credit facilities and exemption of debt redemption reserve (DRR). This move will ease mid segment people to buy their home as most of them take loan facility from financial corporations.
Expectations of Section 80C limit raise
It is expected that the government will increase the deductions under the section 80C from current 1.5 lakhs to 2 lakhs which will benefit the salaried taxpayers to save tax. It may also think about the standard deductions which would benefit the salaried tax payers.
Expecting a clarity in National Pension Scheme
It is expected that the government in this budget will set fresh rules for the pension scheme of central government employees. Government has agreed to raise the share of NPS from 10% to 14 %. It has also agreed that 60% of the NPS withdrawal will be tax free and the remaining 40% will be invested in annuity
Expectation of long-term capital gains in equity investment
It is expected that there would be some equality between the schemes that taxpayers invest in, to save tax.in the current scenario there is no tax when one switches from debt to equity in ULIPS and NPS. So, this switch provides capital gains for ex. If one switches from dividend option to growth option one would be liable to capital gains.
Expectations of HRA benefits to non-metro cities
This budget, it is expected that the government would raise the exemption limit of HRA from their basic salary from 40% to 50%. People staying in cities like Bangalore, Pune, Hyderabad and Gurgaon want their cities to be metro cities to avail the benefit of HRA.
Expectations of pharma sector
Ayushman Bharat, healthcare for all scheme of government was launched in last budget. It is expected to be build upon this year. With the focus on Pharma Vision 2020 and Make in India plans it is expected to be a favourable budget which would help research and development through incentives. The challenges of pharma sector are the pricing and control of the government. The government should provide better policies, governance, regulations to the pharma sectors so that we reduce our dependence on