News Update

Revenue Secretary urges CMs to expedite passage of SGST ActExit Polls - AAP staring at humiliating defeat; BJP likely to score historic winACC appoints IRS officer Ravi Singh as Addl Private Secretary to Power MinisterACC appoints IRS officer Ravi Singh as Addl Private Secretary to Power MinisterUSA favours 'reciprocal' free trade: Treasury ChiefShillong Customs seizes 800 kg of ganja concealed in especially-designed cavity in a truckCBEC Chairperson calls for speedy GST Awareness CampaignINTERPOL drive against illicit firearms - 149 arrested across EuropeGreen Bond Market Has Grown Healthy In 5 Yrs: IREDAIndia turning into hub of international arbitration: Chief Justice of IndiaTaliban forces kill over 100 Afghan soldiersGST Council looking for applicants to fill up CSSS postsEmerging economies account for 75% of global growth: FMDuty Credit Scrip can be utilised/debited for payment of Custom Duties in case of EO defaults - Para 3.18(a) of FTP 2015-20 amendedServices Exports from India Scheme - Eligible period extended up to 31.3.2017W.e.f. 01.06.2017 only those applications for grant of gold dore would be considered where the applicant refinery holds a valid licence from BISGlobal forex remittances shrink but India continues to be No 1International prices soar; Less availability of milk products this summer: GovtMGNREGA - One crore assets geotaggedInter-Ministerial Delegation going to participate in Basel conventionsRailways to organise Global Technology Conference on SafetyST - Once activity undertaken of supply of food to its workers at subsidized rate is understood to be part of Petitioner’s industrial obligation, it is unthinkable that same can be construed as service: HCGoods, after a tour of service abroad, imported by or along with a unit of the Army, Navy, Air Force or CRPF exempted from BCD, CVD & SAD subject to specified conditionsUS Fed Paper says GST may boost India's GDP by over 4%Garib Kalyan Yojana- If tax paid by Mar 31, declaration can be filed by May 10Removal of Cyprus as notified jurisdiction u/s 94A - CBDT clarifies removal notfn to have retro effect11th Civil Services Day: PM cautions officers against excessive use of social mediaApex Court questions Govt decision to link Aadhaar with PANUSD 250 bn Tax Bill - Australian Federal Court rules against ChevronCricket Betting case - CBI chargesheets IRS officer & others
 
FM faces rare challenge in crafting Budget amidst heightened uncertainty

JANUARY 27, 2017

By TIOL Edit Team

THE Union Budget for 2017-18 might well go down in the history as one prepared amidst unprecedented uncertainty. And uncertainty can alter or even mar the planned outcome of the Budget, which is expected to be presented on 1st February. This situation would make Finance Minister Arun Jaitley's task far more challenging than one faced in the normal years.

The six major factors driving uncertainty are: 1) multifarious effects of demonetisation on economy; 2) impact of unfolding Trump Economics including prospects of further hike in interest rates by US Federal Reserve on India and global economy; 3) further postponement of GST roll-out from 1 April to likely 1 July 2017; 4) merger of Railways Budget into Union budget; 5) projected rise in global prices of industrial commodities in 2017 and 6) advancement of budget presentation by a month.

All economists except the ones in the Government agree on one conclusion-demonetization has created uncertainty, whose impact over the medium and long-term is difficult to determine. Many including international entities have scaled down growth projections for India for current fiscal and the coming one 2017-18.

The latest to do so is International Monetary Fund (IMF).

In its Update of the World Economic Outlook (WEO) released on 16th January 2017, IMF says: "In India, the growth forecast for the current (2016–17) and next fiscal year were trimmed by one percentage point and 0.4 percentage point, respectively, primarily due to the temporary negative consumption shock induced by cash shortages and payment disruptions associated with the recent currency note withdrawal and exchange initiative."

Mr. Jaitley is thus expected to unveil a slew of initiatives to offset the adverse impact of demonetization on the economic growth, investment climate for both domestic and foreign investors, enhanced risks of loan defaults, dented state revenue collections and central revenue receipts that are partly shared with States, battered cash-intensive small and tiny enterprises including street vendors and daily labourers.

FM has to thus plan an optimal blend enhanced public sector investments that help attract private investments and create jobs with diverse tax & non-tax sops to perk up economic activities across the value chains. Reversing the trend of slow-down in export growth is yet another objective that FM has to fit in his scheme of ideas.

He also has mull over innovative ways to ease the hardship of daily wage earners, fledging micro-enterprises, farmers and other sections of the society that bore the maximum brunt of cash crisis caused by demonetisation.

And while pitching for inclusive growth-promoting budget, Mr. Jaitley has to keep an eye on fiscal and revenue deficits, both of which have to be kept within the targets mentioned in medium-term flexibility. He might like to be flexible on these numbers, assuming N.K. Singh Committee on review of Fiscal Responsibility and Budget Management (FRBM) Act & FRBM road-map has recommended fixing deficits as a range instead of rigid fixed numbers.

He would also have to factor in lurking fear of return of global inflation and its spillover effect on Indian economy, which is heavily dependent on imported crude oil, liquefied natural gas and coal.

In its latest quarterly Commodity Markets Outlook (CMO) report released on 24th January 2017, The World Bank foresees crude oil prices rising to USD 55 per barrel in 2017 from USD 43/bbl in 2016 following agreements among some Organization of the Petroleum Exporting Countries (OPEC) producers and non-OPEC producers to limit output in the first half of 2017.

Energy prices rose 11 percent in the fourth quarter of 2016 from the previous quarter with strong gains in all fuels. Coal prices soared 38 percent on strong demand and continued supply tightness in China resulting from government efforts to reduce coal capacity. Natural gas prices rose 8 percent, says the report.

Such trends, if they gain momentum, can not only stoke price spiral in economy but also force FM to revisit the taxes especially the periodic hikes in excise duty on petroleum products made in 2014-15 & 2015-16.

The prospects for mid-course interventions by Finance Ministry due to global factors would also be determined by spillover impact of economic changes in the US under Presidentship of Donald Trump.

If the forthcoming budget translates into economic growth of 7.5-8.0% with inflation of 3-4% in 2017-18, then Mr. Jaitley would be credited with achieving a herculean task.


POST YOUR COMMENTS