Nirmala Sitharaman’s bahi khata: More for aam adami?

The buzz is that she will be addressing the demand side of economy — giving consumers more money to spend without cutting back on government expenditure on social schemes

As Finance Minister Nirmala Sitharaman sets out to open her bahi khata (ledger) for the second time on February 1, it is believed that it will not just be about the government’s finances but will also set the roadmap for economic growth during the new decade.

According to economy watchers, the Budget isn’t only about the immediate fiscal issues but also about long-term policies that will help the economy, especially the rural side, achieve the desired targets — rural growth should be in sync with urban growth. The expectations are that schemes such as PM Kisan, MNREGA and Aayushman Bharat will be given a further boost.

So whether Sitharaman meets the expectations of all stakeholders will be known only on Saturday at 11 am. But the buzz is that she will be addressing the demand side of economy — how to give consumers more money to spendwhile not cutting back on government expenditure on social schemes.

Expectations range from re-jigging personal income tax rates, scrapping dividend distribution tax, and recasting the long-term capital gain taxto increasing rural and infrastructure spending.

But will she be able to do all of these given the limited headroom available to the government? “The final call will be the Prime Minister’s and the Finance Minister’s,” said a senior BJP member.

While any change in the income tax structure will benefit just 3.4 per cent of the people, change in dividend distribution tax and long-term capital gains will benefit a handful of investors.So, will she focus on a small section of the people or on the rural sector to boost consumer demand?

“This will be a people’s Budget and not to please just Dalal Street and analysts,” said a senior BJP member, adding that the “focus should be on increasing demand, projects which have been announced to be put on fast track, and, above all, giving people more money to spend.”

“I expect this would be a people’s Budget, aimed at boosting demand, particularly in rural areas, and expanding the national economy,” said Narendra Taneja, National Spokesperson BJP, adding that the “the government’s heart and mind are rightly focussed on spending more in public projects, reforming and modernising the regulations all across and making entrepreneurship more attractive than sarkari naukri among our youth.”

Expectations are that Sitharaman will also look at disinvestment, monetisation of assets, creation of debt instruments, better debt financing, and revival of the bond market.

Even the corporate sector is pushing for some change in personal income tax to boost consumption demand. There are two strong arguments in the regard. First, more consumption will bring back part of the money foregone as a result of GST. And, second, consumers can leverage the money in hand for credit to buy consumer durables such as cars and consumer electronics. This, India Inc believes, will also benefit banks and the give the production cycle a new lease of life.

The Budget could also deal with stressed assets which have spelt trouble for India’s banking sector. In what form it will be — “bad bank” or some other mechanism — remains to be seen.

Sitharaman has a tough balancing act to do. In fact, even at the BJP stakeholders meet there were 200-odd suggestions that included recourse to recovery, decriminalisation of company law, procuring for railways through the Government e-Marketplace (GeM), and simplification of tax administration to ensure that overzealous officers do not harass the common man.