In the budget presented before the 2024 Lok Sabha elections, the government can give some relief to the middle class and employed people on the income tax front. Apart from this, there is also a possibility of increasing the scope of the areas covered under the Production Linked Incentive (PLI) scheme. Renowned economist and chairman of research institute Center for Development Studies Sudipto Mandal has expressed this possibility. Finance Minister Nirmala Sitharaman will present the budget for 2023-24 in Parliament on 1 February. This is his last full budget before next year's Lok Sabha elections.
These are the challenges before the government
When asked about the priorities of the government in the budget in view of the current global challenges and domestic situation, Mandal said that certainly many global problems have come together and this has increased the economic challenges on the economy front in the country. This includes slowing economic growth, rising inflation and current account deficit with insufficient employment generation. Inflation, especially core inflation (excluding fuel and food articles), continues to remain elevated. The pace of economic growth has slowed down in the first three quarters of the financial year 2022-23 and they estimate that the GDP (gross domestic product) growth rate will be only 5.2 per cent in the financial year 2023-24.
Mandal said that apart from this the current account deficit (CAD) is also above the satisfactory level. Looking at all these things, he believes that the Reserve Bank will continue its efforts to bring inflation under control, while special attention should be paid to economic growth, especially employment-enhancing growth and export-promoting measures in the budget.
According to Reserve Bank data, the current account deficit has reached $ 36.4 billion, or 4.4 percent of GDP, in the second quarter of the current financial year, which was $ 18.2 billion, or 2.2 percent of GDP, in the first quarter April-June. CAD is mainly the difference between the total export and import value of goods and services.
Different opinion of some experts
When asked about the expectation of middle class and salaried people getting some relief in the budget on the income tax front, Mandal said that in reality a large proportion of salaried people do not pay income tax. Only a small section of upper middle class and rich people pay income tax. Therefore, any change in the provisions of income tax will not affect a large section. Also, by global standards, our personal income tax rates are not very high.
Instead of change, it is necessary to have stability in our tax structure. That's why they feel that no significant change is expected in the income tax structure. From the point of view of taxpayers, simplification of income tax provisions through the Direct Taxes Code will be more important. It is better to simplify tax payment procedures and compliance requirements.
Mandal said that however, it is quite possible that the Finance Minister will announce some relief by increasing the exemption limit (tax slab and investment limit) or standard deduction. In response to another question, the economist said that the realty sector has just started coming back on track after a long period. Along with this, it is an employment enhancing sector. In such a situation, if the exemption limit on interest payment on home loan is increased, then it will be a welcome step.
When asked about the Production Linked Incentive (PLI) scheme, he said that the PLI scheme has boosted production in some areas. But its advantage has mainly gone to large enterprises in the organized sector. He is hopeful that this scheme can be extended to more employment generating sectors. It would be better to implement the scheme for those sectors which export a major part of their production. This will help in promoting production in export areas.
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