Challenges waiting for the new Finance Minister of India

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When the new finance minister steps into North Block, one of the first issues that he will have to deal with is raising more resources, given the BJP’s ambitious plan to expand some of the social sector schemes and the mega investment push announced in the party’s manifesto. Although many are expecting a tax stimulus to revive demand, officials are virtually unanimous in suggesting that a tax cut is not an option that should be pursued, either in direct taxes or on the GST front.

 

In its bid to show that the fiscal deficit target had slipped only marginally, the government left several bills unpaid, including those to the Food Corporation of India, whose borrowings have shot up. Instead, they are suggesting tightening the noose around evaders, especially related to indirect taxes. Given the political compulsions and teething problems of GST, officials have been complaining that they were unable to crack the whip on evaders.

Already, data analytics is under way to identify those who have not been paying their dues. The budget, which is likely to be presented in July, will be keenly awaited for clues to the government’s plan to step up consumption and investment in growth-boosting sectors such as infrastructure. The government is expected to look at asset sales aggressively in the state-run companies to raise much needed resources.

The sale of Air India, which had to be shelved last year due to lack of appetite, will be a key task that the new government will undertake. Officials have already readied a comprehensive plan to complete the sale of the state-run airline in the current fiscal year. The war against black money may also be accelerated and the move to shore up tax revenues will be pursued. After demonetization, there has been an increase in tax returns being filed and the new government is likely to step up the efforts to boost compliance.

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