Finance Minister Nirmala Sitharaman faces an uphill task of balancing relief expectations in the form of slab revisions contrasted by limited existing fiscal headroom. The tax collections saw a 20% YoY growth, highlighting an economic recovery. Now with the emergence of Omicron, experts feel that the government could think of relieving the taxpayers by getting the slab down to 25% from 30%.
The majority of employees are now working from home (WFH). The employees are expecting an additional deduction of Rs 50,000 to cover the additional expenses such as internet charges, electricity etc. A specific provision in the income tax laws along with the full deduction or at least a reasonable deduction for the various WFH expenses would be a most welcome relief to the salaried professionals.
The prices of food grains and other grocery items have increased. To solve this, the government could slash the subsidy bill. The total subsidy outgo for the current fiscal may be around Rs 5.35-5.45 lakh crore. Factoring in the protests by farmers in Delhi, there could be some relief on this front.
Will FM Live Up To People’s Expectations?
At the time of COVID-19, Finance Minister Nirmala Sitharaman made sure that everyone received food, shelter and basic amenities. This time the challenges are scary, and the requirements are ample. Sitharaman will face the grave problem of balancing the tax revisions with the fiscal deficit.
Moreover, the supply-side bottlenecks and rising global commodity prices are further pushing inflation higher. And rising commodity and fuel prices will hamper the purchasing power of a common man. While RBI continues to remain positioned on not increasing the interest rates on banks. All these issues are interrelated and solving this will take time. So far, Sitharaman has been able to address these issues in the last few years and a similar effort is expected this year too.
What Lies Ahead?
The support to agricultural farmers, the retail sector and MSMEs will be the key focus of this budget. The headwinds from COVID-19 will continue but securing the intensive sectors is much more important so that the warehouses don’t run dry. The credit demand is improving, and that’s why the banking sector will also remain in focus. Overall, the agricultural sector is expected to receive massive relief but until then, let’s see what lies in the cards.