Budget 2020: Reforms that can push recovery of economy

By Dr. D K Aggarwal,

At this juncture, rationalisation of direct taxes and an income tax exemption up to the level of income of Rs 5 lakhs will be a great breakthrough to enhance the personal disposable income of the individuals and to increase the consumption demand in the economy.

With no personal income tax applicable up to the income of Rs 5 lakhs for the individuals, income tax slabs should be rationalised to 10% for people earning up to Rs 10 lakhs per year, 20% for those with incomes of over Rs 10 lakhs and up to Rs 20 lakhs, 30% for income over Rs 20 lakhs and up to Rs 2 crore and 35% for individuals earning more than Rs 2 crore.

Increased expenditure of the government to enhance consumption demand along with the implementation of Rs 102 lakh crore National Infrastructure Pipeline (NIP) has the potential to push economic growth trajectory to more than 8% in the next 3 years.

Access to finance is a major roadblock being faced by the industries particularly by the MSMEs impacting their competitiveness and growth. To address the liquidity crunch in MSMEs, there is a need to set up a dedicated fund of Rs 25,000 crore or more with no collateral being asked for the MSMEs.

Long term Capital Gains Tax on shares is suggested at 10% for the holding period after 1 year, 5% after 2 years and 0% after 3 years as when STT was levied it was in lieu of exempting long term capital gains tax.

Around 95% of MSMEs are in Proprietorship/Partnership business. They are not getting any relief from the recent cut in corporate tax rates. So at this juncture, we suggest a uniform tax rate of 25% to such businesses, going forward.

To kick-start, the export growth trajectory, increase in export earnings by the exporters on the base of the previous year (year-on-year earnings) should be tax-free.

MSME exporters must be fully exempted from tax on their export earnings as this will enhance the exporters’ motivation and strengthen their competitiveness in the global markets.

For doubling farmers’ income, a properly designed market support scheme for agricultural produce and dismantling of barriers to markets for farmers must be pursued.

APMC should be dismantled and e-NAM should become the vehicle for farmers’ produce across the states.

Increase in public healthcare spending to at least 3% of GDP with an increase in the annual budget each year for delivery of better health services to the people.

Health centers should be made available within a radius of 1 km and hospitals within a radius of 10 km.

There is a need to initiate work on inclusive and approachable education with spending of at least 4.5% of GDP on education.

Presence of schools within the radius of 1km, colleges within the radius of 10km and universities within the radius of 25 km in the next five years must be ensured by the government.

A robust analysis of current skill gaps to promote effective skill development should be undertaken to create more and more employment opportunities for the growing workforce in the country.

Skill Mapping must be done to scientifically plan human resource needs in the different sectors of the economy.

At judiciary reforms front, vacancies of judges should be filled up in order to speed up the justice delivery system.

Procedural laws must be simplified, mediation should be encouraged and judicial and court management system should be strengthened to speed up the judicial process.

( Dr. D K Aggarwal is the President of PHD Chamber of Commerce & Industry)