In today's Finshots we see what Budget 2022 could bring to the table
”Madam, please let every Saturday be a public holiday for public sector banks”
“Ma’am please make the tax filings simple”
“Madam please revise the income tax slabs”
“Madam you should abolish the income tax, it will boost demand and consumption”
If you’ve seen such “ideas and suggestions” being thrown around on Twitter or LinkedIn recently, you’d know that the Union Budget is just around the corner. As you’re reading this, a bunch of diligent government employees are holed up somewhere in Delhi busy laying the final touches on this year’s Budget. They are quite literally locked in the basement of the North Block, cut off from their friends and family. Just so that the Budget remains a secret. Don’t worry — They’ll be left to their own devices once the Finance Minister unveils the budget in Parliament. But until then, we can only wonder what’s happening down there.
Or perhaps guess what’s likely to come.
Let’s start with the Farm economy.
There is a general expectation that the subsidy bill will shoot up to record levels this year. The government is expected to set aside some ₹1.4 trillion ($19 billion) for fertiliser subsidies alone. That is to say, the government will use this money to compensate fertilizer companies who will sell products to farmers at a lower rate compared to market prices. This is important because fertilizer prices skyrocketed last year. Prices of Di-Ammonium Phosphate, for instance, rose by as much as 58%. There was a lot of agrarian distress in many parts of the country owing to this fact alone. And there is some consensus that the government may do its bit to alleviate some of this burden.
Next, the government will continue to provide more loans to farmers. You could also see support and incentive programs kicking in — especially to aid the export market. There are even suggestions that we may see Production Linked Incentive schemes for food processors. The idea is that incentives to produce more could potentially get them to invest in storage and infrastructure. So yeah, there is an expectation that the government will set aside funds to boost farm income, reduce input costs and aid production.
Also, back in 2016, the Government set a lofty goal of reforming the sector and doubling farmers’ income by 2022. Well, 2022 is here and we are nowhere close to reaching those targets. In fact, this Budget comes right after the controversial reversal of farm laws — which probably tells us that there is added pressure on the government to deliver a big win for farmers.
It cannot be a Budget week without demands for income tax relief and this year is no different. Income and inflation have both borne the full brunt of a resurging covid. And it is understandable why so many people would expect the government to offer tax relief. But this can happen only when the government has its own finances in order. For one, the government’s debt and interest expenditure has been piling up and so has its import bills (largely due to oil prices).
They’ve also been relentlessly spending money on infrastructure, defence and growth initiatives, beyond their means and it is highly unlikely that they will take the foot off the pedal. So there may not be substantial relief for taxpayers — not yet.
But regardless we could see some tweaks. Section 80C is arguably one of the most popular tax saving options for most salaried folks. If you have ever opted for deductions under 80C you would know that it allows you to reduce your taxable income so that you can keep a larger chunk of your salary. All you have to do is commit to some tax-saving investments — think PPF, life insurance, etc. Right now, you can only claim deductions up to ₹1.5 lakhs. In fact, it has been the case for the past 7 years. However, since then, a lot has changed. People earn more, they spend more and they save more. So, 80C is possibly ripe for a relook during Budget 2022. Similarly, we could also see an increase in the tax exemption limit for Health Insurance under Section 80D. Maybe a minor revision in tax slabs could also be on the cards. We could even see a brand new “Work from Home” allowance come into existence.
Jobs & privatization
Last week an empty train was set on fire by angry job seekers. They had been rioting for three days, livid over the selection process of the railways’ recruitment exams. Now the whole issue is pretty complex, but here’s a gist of what happened — 1.25 crore people had applied for 35,281 Railway jobs. And when some students alleged that the recruitment process was rigged in favour of a few select candidates, there was pandemonium on the streets. And the finance minister would be remiss to not address the simmering unemployment crisis brewing in this country.
Also, divestment/privatization was a big part of last year’s budget. The government had aimed to sell its stake in public sector companies and raise some ₹1.75 lakh crores in the process. However, they only ended up selling ₹12,029 crores worth of assets (less than 10% of the intended target). And even with the impending LIC IPO, the government could find it hard to plug in the shortfall. So this year’s budget could possibly revitalize those efforts.
So yeah, there’s a lot to look forward to and you can bet that we will be there covering the budget in full.
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