Demonetisation and Budget 2017: What is the connection?
The Union Budget for the year 2017–18 will be unique. For starters, it marks the first time that the budget will be presented on 1st February. Secondly, the railway budget will be presented along with the general budget. But the most important aspect for the common man is this: Budget 2017 is the first budget since the government’s demonetisation drive.
So, here is a look at the possible links between demonetisation and the upcoming budget.
- Impact on the economy
The government introduced demonetisation to curb black money. The move received praise and criticism across the country – the cash crunch eventually leading to a major dip in the real estate sector. Other sectors, such as FMCG and automobiles, also bore the brunt with poor sales. So, expectations are high that Budget 2017 will bring the economy back on track.
- Incentives for the common man
Following demonetisation, incentives are likely to relieve the burden of the common man. Individuals and experts are anticipating a revision in the minimum taxable income. The present level stands at Rs2.5 lakh but there are expectations that this could rise by to Rs.3 lakh. The Federation of Indian Chambers of Commerce and Industry (FICCI) has recommended a revision of the tax slabs for individuals. This change would increase the amount of disposable income in the hands of taxpayers.
- Cashless India
Combating black money was the first agenda of demonetisation. But the move had a second agenda too. It sought to transform India into a cashless country. The Finance Ministry could provide new incentives to promote cashless transactions. Discounts on cashless transactions are likely. This may encourage spending through credit cards, debit cards, and mobile wallets. Stakeholders in the e-commerce sector are hoping for rebates on the goods and services tax (GST) on commissions.
The current government is keen to provide affordable housing to all. It introduced the Pradhan Mantri Awas Yojana (PMAY) in 2015. The budget for 2016–17 also promoted low-cost housing through cheap home loans. But demonetisation has led to a drop in the demand for housing. So, the budget may provide further benefits to the real estate sector for the next fiscal year.
The announcement of demonetisation coincided with the rabi season. This had a big impact on farmers. They found it difficult to get liquid cash. This disrupted the purchase of seeds and other inputs for the rabi season. So, the budget could provide incentives to the agriculture sector. Farmers might also get support to use digital transactions. This could help them buy seeds and equipment with ease.
The bottom line
Many factors affect the decisions of the Finance Ministry in preparing the budget. The impact of demonetisation should play a major role in this year’s budget. Experts are hopeful that 1st February will bring the common man a reason to smile.