Note ban distress leaves scant room for giveaways in Budget 2017

Jaitley is under pressure to offer tax giveaways and step up capital and welfare spending

Budget 2017

1484953943-3237

Prime Minister Narendra Modi’s decision late last year to scrap high-value bank notes has put his finance minister in a bind ahead of the annual Budget 2017 next month.

Arun Jaitley is under pressure to offer tax giveaways and step up capital and welfare spending to ease the pain from demonetisation, but the economic disruption caused by Modi’s jolt has made forecasting next year’s revenue outlook a stab in the dark.

While indirect tax receipts grew by an annual 14.2 percent in December, a slump in consumer spending along with a contraction in services and manufacturing suggest the outlook is anything but rosy.

Adding to his dilemma is a delay in launching a new national Goods and Services Tax that would replace a slew of indirect levies.

“It is an unprecedented budget,” said a senior government official with direct knowledge of fiscal planning, likening it to navigating in uncharted waters.

Modi’s decision in November to scrap 500- and 1,000-rupee notes – 86 percent of the cash in circulation – sought to crack down on tax dodgers and counterfeiters. Yet it has left companies, farmers and households in all sorts of bother.

The International Monetary Fund has trimmed its growth outlook for the fiscal year beginning in April to 7.2 percent from 7.6 percent previously, citing the blow to the cash-reliant economy.

Jaitley plans to deliver his budget on Feb. 1, just before voting begins in a round of regional elections, the biggest in the swing state of Uttar Pradesh. Their outcome will be key for Modi’s chances of winning a second term in 2019. Read More

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s