People of India will be watching closely on Wednesday to see how Finance Minister Arun Jaitley presents Narendra Modi Government's fourth Budget in Parliament, which is perhaps the most challenging Budget that may look to soften blow of currency ban with tax and other sops as he seeks to revive growth.
While largely sticking to fiscal consolidation roadmap, Jaitley will present the Budget for 2017-18 amid strong headwinds caused by government decision to invalidate 86 per cent of the currency and the newly elected US President making protectionist noises.
Topping the list of sweeteners could be the hike in Income Tax exemption limit to Rs 3 lakh from current Rs 2.5 lakh as the Minister will look at putting more money in hands of people to not just create a feel good atmosphere but also check the disruptive impact of demonetisation on demand, supply chains and cratered credit growth.
Also Read | Economic Survey: Retail inflation projected to stay below 5 per cent in FY 2017
Jaitley’s fourth Budget is likely to have a fresh feel, introducing many changes to an annual expenditure statement that has changed very little in the 150 years.
Going ahead with the government's reform agenda, Jaitley will discard the 92-year-long tradition of presentation of a separate Rail Budget and instead make it part of the General Budget earmarking a few paragraphs on the public transporter's finance, projects and the road map for the next fiscal.
Also Read : India's economic history decoded with landmark budgets presented by visionary Finance Ministers
Ahead of the start of the Budget session, Prime Minister Narendra Modi on Tuesday hoped for a comprehensive discussion in Parliament.
He said it is the first time that the Union Budget is being presented on February 1. Modi recalled that while budgets were earlier presented at 5 in the evening, it was former Prime Minister Atal Bihari Vajpayee who advanced it to morning.
"Today, a new tradition will begin. First, the budget is being advanced by nearly a month. And second, Rail Budget in being incorporated into this. There will be discussion on this also and the benefits that it will have in the coming times," he said on Tuesday.
Expectations from Jaitley's Budget 2017-18
Income Tax slab
India's economic growth is likely to dip to 6.5 per cent this fiscal after shock demonetisation shaved off a good 0.5 percentage points but it will rebound to 6.75-7.5 per cent in the next financial year, Economic Survey said on Tuesday, calling for bold cut in tax rates.
The pre-Budget pointer called for cut not just in individual income tax rates and a timetable for reducing the corporate taxes but also for widening the net to progressively encompass "all high incomes".
The salaried class is hoping for a personal tax bonanza this year.
Also Read: Union Budget 2017: What is Economic Survey? Here is all you need to know
According to report, hopes are really verigh high ahead of this year's buget as the finance minister will increase exemption limit by at least Rs 50,000 to Rs 300,000. The existing exemption limit for senior citizens is Rs 300,000 and Rs 500,000 for super senior citizens (80 years and above). The wish list is that this should be raised to Rs 400,000 and Rs 650,000 respectively.
There is another demand specialy from the middle class tax payers of the country to increase deduction limit under 80C, which is Rs 150,000 at present, and the demand is to increase it by Rs 100,000.
Rebate on Home loan
Those people who have borrowed home loans have demanded to allow higher deduction as the current tax deduction allowed is Rs 200,000 on home loans on repayment of the principal.
Alternatively, he may raise the deduction limit for interest paid on home loans to Rs 2.5 lakh from Rs 2 lakh currently. A higher medical rebate may also be on the cards.
Besides tax break, there could even be a universal basic income in the Budget, industry officials and tax experts said.
But cutting 30 per cent corporate tax rate to lift sagging investments may not be easy given that government's official estimate of 7.1 per cent GDP growth for the current financial year does not take into account the chaos wrought by demonetisation.
While revenue collection targets for the current fiscal may exceed, there are doubts if Jaitley may project any substantial jump in tax receipts in 2017-18.
Also, the rising oil prices are a cause of worry for him, leaving him with very little fiscal room to manoeuvre social and infrastructure schemes.
Read | Highlights of Economic Survey 2016-17
Incentives or schemes for farmers and rural India, women and social sectors like health and education may be cornerstone of his budget given that five important states including Punjab and Uttar Pradesh will be voting within days of his Budget presentation.
Besides agriculture, the Finance Minister may also announce schemes for boosting domestic manufacturing and promoting start ups.
Tax experts and economists said Jaitley may hike the service tax (currently at 15 per cent) to align with the GST regime.
Fiscal deficit and public spending
He will have to juggle numbers to remain largely within the fiscal consolidation roadmap. The current year's fiscal deficit target of 3.5 per cent of GDP is mostly likely to be met on back of surge in tax receipts from 7th Pay Commission grant to employees and tax amnesty schemes.
It remains to be seen if he will narrow the deficit, the widest in Asia, in 2017-18 to 3 per cent planned previously.
He may continue to piggyback on public spending, especially on infrastructure, as he looks to reverse the investment collapse.
Also Read | Union Budget 2017: Complete list of bills to be taken up in budget session starting today
The farm credit target is likely to be raised by a whopping Rs 1 lakh crore to Rs 10 lakh crore in Budget 2017-18 in order to increase credit flow in the agriculture sector.
According to sources, the government may increase the agriculture credit target to Rs 10 lakh crore for 2017-18 fiscal from the existing Rs 9 lakh crore.
That apart, the government may also allocate Rs 10,000 crore for Pradhan Mantri Fasal Bhima Yojana (PMFBY) in the Union Budget to be presented by Finance Minister Arun Jaitley on February 1.
Also Read | Lesser known but interesting trivia about India's Union Budget
Rail Budget: Expectations and planning
A safety fund of Rs 20,000 crore for railways reeling under a series of deadly derailments, development of new lines, station redevelopment and setting up of Rail Development Authority and High Speed Rail Authority will be in focus as Finance Minister Arun Jaitley presents the first Rail Budget subsumed in the General Budget on Wednesday.
Jailtley is likely to give more focus on infrastructure development such as new lines, doubling, station redevelopment, safety upgradation.
Reeling under a series of derailments, the Budget is likely to announce creation of a separate safety fund of about Rs 1 lakh crore over the next five years out of which Rs 20,000 cr will be earmarked for 2017-18, according to sources.
Railways will also miss the operating ratio target of 92 per cent and is likely to settle at about 94-95 per cent.
The Budget 2017-18 is likely to announce setting up of Rail Development Authority, a regulatory authority for the public transporter. The formation of High Speed Rail Authority with the selection of its managing Director and other directors is also likely to be announced.
Video | Union Budget 2017: President Mukherjee addresses joint session, says Govt committed to combat terrorism
The Budget will also give a fillip to non-fare revenue exercise and monetising assets like vacant land, estimated to be about 48,000 hectares including redevelopment of stations with private participation.
An ambitious project of increasing train speed upto 160-200 km per hour on major trunk routes will be announced which will involve fencing off the Delhi-Howrah and Delhi-Mumbai routes at an estimated cost of Rs 21,000 crore.
Railway Minister Suresh Prabhu, who had written to Jaitley seeking Rs 1.19 lakh cr as a special safety fund, finally succeeded in getting a nod from the Finance Ministry for creation of a separate fund for the badly needed safety upgradation of rail infrastructure.
While Rs 15,000 crore will be from the gross budgetary support, railways will have to generate Rs 5000 crore from internal generation. It is to be seen whether the Railways will generate it by levying a safety cess or manage through the internal surplus.
Click Here for Full Coverage: Union Budget 2017-18
Railways, which is losing both passenger and freight volumes, witnessed its traffic receipts in April-December 2016 down to Rs 1.19 lakh as against Rs 1.34 lakh cr target, a negative growth of more than 11 per cent.
Despite the introduction of flexi-fare, the passenger revenue segment has also witnessed a fall in earnings by over 9 per cent as compared to the last year.
The plan outlay is likely to go up from Rs 1.21 lakh crore to about Rs 1.36 lakh cr in the next fiscal.
Railways have accelerated spending by over 28 per cent on infrastructure projects in the nine months of the current fiscal as against the corresponding period in the last fiscal.
Expenditure on projects like laying new tracks, doubling and electrification of network across the country during April-December 2016 has witnessed a significant jump touching Rs 68,059 crore mark as compared to the Rs 53,118 crore in the same period last fiscal, which was an increase of 28.1 per cent, according to the Railways data.
Click here for Full Coverage: Budget Session of Parliament 2017
The budget will continue to focus on speedy electrification and laying of new tracks as part of capital expenditure plan.There will be no announcement of new trains.
The Demand for Grants with details of allocations for states and specific projects will be taken up on February 3.
(With PTI inputs)