The government has done a deft job on the fiscal side and it is expected that prudence will continue to remain important to ensure macro stability. Nonetheless, the survey highlighted that the government has an opportunity to leverage additional resources from robust tax collections and the Reserve Bank of India’s dividend transfer.
This fiscal headroom could be used to increase the spend on social sector schemes especially to support the rural economy. Furthermore, subsidy estimates are anticipated to remain stable, reflecting a focus on targeted benefit delivery.
The capital expenditure target could be increased but not much deviation was expected from Rs 11.1 trillion for FY25, said the report.
This could be attributed to a slow capex spending in the first the half of FY25 on account of elections and monsoon.
The fiscal deficit target for 2024-25 could be slightly lowered (from the 5.1 per cent target laid out in the Interim Budget earlier this year) and the market borrowing projections for FY25 are likely to be revised downwards, positively impacting the bond markets and interest rates, the report added.
Tax Reforms
According to the survey, some reforms on the taxation side is expected aimed at stimulating economic growth.
The government can provide personal income tax relief, potential revisions in tax rates to boost disposable income and stimulate consumption, particularly for individuals at the lower income brackets is expected.
Further, it is suggested that enhancing limits under Section 80C and similar provisions could encourage long-term savings and investment.
Simplification of goods and services tax is also expected. Although matters pertaining to GST are outside the ambit of Budget, the survey revealed that at least a framework guiding towards streamlining of GST slabs could be put in place.
This would enhance compliance and ease of doing business. Further, bringing oil and natural gas under the ambit of GST and providing clarity on cases of inverted duty in the current structure were cited as other possible focus areas for the budget.
The survey revealed that simplification of capital gains tax is further expected in terms of two or three broad buckets of different types of assets, holding period for such assets to turn long term, indexation benefit eligibility, LTCG tax rate and STCG tax rate for such assets without distinction between residents and non-residents.
Another expectation involves making certain surcharges and cesses part of the divisible pool of taxes.
This move will bolster state finances and ensure more equitable resource distribution across the country. It could significantly improve federal fiscal relations and provide states with more flexibility in their spending decisions, said the report.
Housing, MSMEs and Innovation
Introduction of interest subvention for middle-class housing schemes, potentially administered through agencies like the Housing and Urban Development Corporation Ltd (HUDCO) is expected, highlighted the survey.
Further, support for the micro, small and medium enterprises is also expected through measures like extended NPA classification period — increase from 90 to 180 days to provide financial breathing room to MSMEs and leveraging Account Aggregator framework for MSME lending.
The Interim Budget announcement earlier this year displayed a clear intention towards encouraging innovation and this is expected to continue. It is expected that further details and modalities on the R&D and innovation fund announced in Interim Budget for its effective utilization will be provided, the report added.
