<p>Should it be Reserve Bank of India’s sole botheration to push up consumption and bring the economy back on a high growth curve that can instil confidence in investors and consumers alike? RBI Governor S K Das does not think so. Das categorically stated that fiscal measures and structural reforms be unleashed to push up consumption and thereby growth. After having cut key interest rates by 135 basis points spread over five bi-monthly meetings of monetary policy committee (MPC), Governor Das is bang on the dot while seeking Finance Minister Nirmala Sitharaman to bite the bullet in the Union Budget to be presented on February 1. Prime Minister Modi and Sitharaman will have to be on the same page for the Budget to negate pessimism and uncertainty among industry captains.</p>.<p>As a strategy, the Centre will have to focus on infrastructure spending to revive the investment cycle. The Rs 1,08,000 crore infrastructure plan announced by Sitharaman should get the priority to maximize dividends. On the parallel, states may have to pitch in with capital expenditure across sectors like food processing, tourism and commercial services that can have a multiplier effect for businesses and carve out fresh job opportunities. Expansion and revamp of the Mahatma Gandhi rural job guarantee scheme by including agriculture, doubling funds allocation will help revive rural consumption. Inordinate delay in the release of payments to those employed under MNREGA will have to end; doubling guaranteed work to over 200 days should be seriously explored. Setting aside extra resources to the Kisan Yojana, upward revision in the benefit to Rs 9,000 per family annually could boost rural spend. Clearing backlog in subsidy payments on oil, food and fertilizers, releasing payments to corporates under government projects should be prioritised. Getting expenditure matrix right will be the key to reviving growth.</p>.<p>Some economists have pushed for enhanced personal tax exemption limits, expanded the ambit of deductions and revisiting three slabs structure as a logical extension of a cut in corporate taxes. Given the thin resources position, it will be a good idea to postpone lowering personal tax rates that may otherwise keep middle class and salaried personnel happy. Instead, providing higher interest subsidy and enhanced tax rebate for families seeking to buy a second property could act as a booster dose for housing and real estate sectors. Making rental income free of all tax liabilities is yet another option to put more money in the hands of the people. De-cluttering tax payment procedures with a focus on honouring honest taxpayers should continue to be on top of the list. Scaling down big-ticket tax litigation and putting in place an institutional mechanism for mediation on tax disputes as in several European geographies could unlock a huge chunk of unrealised tax revenues.</p>
<p>Should it be Reserve Bank of India’s sole botheration to push up consumption and bring the economy back on a high growth curve that can instil confidence in investors and consumers alike? RBI Governor S K Das does not think so. Das categorically stated that fiscal measures and structural reforms be unleashed to push up consumption and thereby growth. After having cut key interest rates by 135 basis points spread over five bi-monthly meetings of monetary policy committee (MPC), Governor Das is bang on the dot while seeking Finance Minister Nirmala Sitharaman to bite the bullet in the Union Budget to be presented on February 1. Prime Minister Modi and Sitharaman will have to be on the same page for the Budget to negate pessimism and uncertainty among industry captains.</p>.<p>As a strategy, the Centre will have to focus on infrastructure spending to revive the investment cycle. The Rs 1,08,000 crore infrastructure plan announced by Sitharaman should get the priority to maximize dividends. On the parallel, states may have to pitch in with capital expenditure across sectors like food processing, tourism and commercial services that can have a multiplier effect for businesses and carve out fresh job opportunities. Expansion and revamp of the Mahatma Gandhi rural job guarantee scheme by including agriculture, doubling funds allocation will help revive rural consumption. Inordinate delay in the release of payments to those employed under MNREGA will have to end; doubling guaranteed work to over 200 days should be seriously explored. Setting aside extra resources to the Kisan Yojana, upward revision in the benefit to Rs 9,000 per family annually could boost rural spend. Clearing backlog in subsidy payments on oil, food and fertilizers, releasing payments to corporates under government projects should be prioritised. Getting expenditure matrix right will be the key to reviving growth.</p>.<p>Some economists have pushed for enhanced personal tax exemption limits, expanded the ambit of deductions and revisiting three slabs structure as a logical extension of a cut in corporate taxes. Given the thin resources position, it will be a good idea to postpone lowering personal tax rates that may otherwise keep middle class and salaried personnel happy. Instead, providing higher interest subsidy and enhanced tax rebate for families seeking to buy a second property could act as a booster dose for housing and real estate sectors. Making rental income free of all tax liabilities is yet another option to put more money in the hands of the people. De-cluttering tax payment procedures with a focus on honouring honest taxpayers should continue to be on top of the list. Scaling down big-ticket tax litigation and putting in place an institutional mechanism for mediation on tax disputes as in several European geographies could unlock a huge chunk of unrealised tax revenues.</p>
