From tax rate cuts to job creation, India Inc sees a populist Budget

Tax rate cuts, job creation measures expected: BS POLL

India Inc is expecting a slew of economy-boosting steps such as income-tax rate cuts, increased rural infrastructure spending, and job creation measures in the Union Budget, to be announced by Finance Minister Nirmala Sitharaman this Saturday.

In a snap poll conducted across India, of 25 CEOs, this week, the mood among corporate heads was cautiously optimistic with many CEOs saying the Budget must announce measures to revive economic growth, which is expected to fall below 5 per cent in the financial year ending March 2020. About 56 per cent of the CEOs polled said they expected a “populist” Budget, which would boost consumption demand.  

An overwhelming majority (88 per cent) expected the government to step up spending in rural infrastructure to boost the economy.

“The government must revive rural demand to kick-start economic growth,” said a Delhi-based CEO. 

Half of the CEOs polled, however, did not expect the GDP growth target to be scaled down, while 24 per cent said it would be. Eighty per cent of the CEOs expected the government to slash income-tax rates to give a push to consumer spending. 

 

In the recent months, consumers are not buying new cars or homes as they are worried about their future. CEOs said any income-tax cut would give extra money in the hands of taxpayers, which would help revive consumer spending and bring in “feel good” sentiment. At the same time, 56 per cent of the CEOs polled expected the rich to be taxed more. 

“I hope for rationalisation with the direct tax code as well, which will put more disposable money in the pocket of the taxpayers enhancing consumer sentiments, higher consumption and an overall positive multiplier effect on the economy,” said a CEO. 

About 84 per cent of the CEOs said they expect several job creation measures in the budget to be announced on Saturday. “Creating employment opportunities is one of the key focus areas if the country has to reach its vision of a $5 trillion-dollar economy by 2025,” said a Kolkata-based CEO.

When asked whether they expected the finance minister to be transparent on the fiscal deficit, almost half (48 per cent) replied in negative, while another 32 per cent expected her to be transparent.

The CEOs were also expecting several measures to boost sentiment among foreign investors, who are eagerly waiting for the Budget to make their investment decisions. Three-fourths of the CEOs expected the Budget to be generous towards foreign investors. “Foreign investors are looking for more. They are rattled by the repudiation of contracts. There is genuine fear among foreign investors which needs to be addressed. More so since the Indian legal system is so slow,” said a CEO of a steel company. 

Bidvest, a South African company, wrote to the government this month, seeking its help to sell its shares in Mumbai airport as litigation stopped its exit for the last one year. The mood among foreign investors was also dampened with the Supreme Court asking telecom companies to pay adjusted gross revenue in accordance with the government of India’s demand. The CEO of Vodafone PLC, which owns a majority stake in loss-making Vodafone Idea, has warned that its India unit would face liquidation due to the huge outgo.