NEW DELHI: Prime Minister Narendra Modi urged parties “to help in the smooth functioning” of parliament , pointing out that “this is the first time the budget has been advanced by a month.” Mr Modi said “a new beginning is being made,” pointing out that for the first time ever, the railway budget has been merged with the annual budget, ending a nearly century-long practice, while the date of the general budget, usually the last working day in February, has been advanced to ensure proposals take effect from April 1, the start of the new financial year.
The Trinamool Congress headed by Mamata Banerjee has announced that it will not be present tomorrow when Finance Minister Arun Jaitley will present the government’s annual budget. The party has said that its requests to delay the budget because it coincides with the important festival of Saraswati Puja have been ignored.
“In the last few days, we have had discussions with the opposition parties in public interest,” said PM Modi as he arrived at parliament. His government has been under attack from the opposition over the sudden demonetization drive that was launched on November 8.
With 500- and 1,000-rupee notes cancelled at short notice, 86% of the cash in circulation was abolished, leading to a large cash crunch. Weekly restrictions on how much cash can be accessed by individuals have still to be lifted.
Today, the government will present the Economic Survey, which sets the scene for the Finance Minister’s fourth annual budget.
The budget session will be held in two parts as happens every year.
The first part ends next week on February 9. The houses will reconvene on March 9 and the session will end on April 12.
The budget this year is being tagged as the most challenging yet for the Finance Minister on account of the radical monetary shock therapy that his government has administered.
Judging how quickly the economy will recover is a tough call, making Mr Jaitley’s revenue projections a shot in the dark.
A delay in the launch of a new national sales tax has added to the uncertainty. The Goods and Services tax (GST) is expected to improve tax compliance and check evasion, but the union and state governments have yet to work out its details.
Officials say the budget will likely offer modest tax concessions and ramp up spending to help the economy recover. Paying for those giveaways may require Mr Jaitley to slow the pace of fiscal tightening, officials told news agency Reuters.
As well as buoying consumer spending, which contributes nearly 60 percent to gross domestic product, sops to voters could also shore up the fortunes of the BJP in the five states including Punjab and Uttar Pradesh that start voting on Saturday. Opposition parties lost a case for the budget to be delayed to after elections are completed. They said that presenting the budget before voting gives the ruling party the opportunity to announce populist schemes that could influence the election in their favour. However, the Supreme Court ruled that the budget should be held as scheduled and the powerful Election Commission has banned references to work accomplished or programs specific to the states that are voting.
PM Modi has said in his campaign speeches that the notes ban would punish the venal rich. Bad economics may be good politics, say some analysts.
“Indian politics is determined by intangible factors of voter perception and not necessarily just the tangible economic numbers,” said Shailesh Kumar, a senior analyst with Eurasia Group. “For the Indian voter, demonetisation signals that Modi is trying, and is perhaps the only one doing something to address corruption.”
Ahead of the GST’s expected launch from July 1, Mr Jaitley may increase the service tax rate to bring it into line with the proposed standard rate under the new tax regime.
An income tax amnesty scheme launched after PM Modi’s banknote ban is also likely to lift receipts, but officials are reluctant to say by how much. Similarly, expansion in the formal economy following demonetisation should widen the tax base.
“The new (financial) year is likely to be a year of direct tax buoyancy,” said Pranjul Bhandari, chief India economist at HSBC.
India, meanwhile, risks losing its status as the world’s fastest-growing big economy to China. The International Monetary Fund this month cut its 2016/17 forecast by one percentage point to 6.6 percent.