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Indian Government Preparing To Present Its Pivotal Budget

indiaThe upcoming budget in India is widely seen as a decisive moment for the ruling BJP government and the Indian Prime Minister Narendra Modi. Many believe that this budget will seek to deliver on electoral promises of improving the tax regime and increase public spending in an attempt to improve economic growth in India.

PM Modi has been under criticism for doing little to deliver on ambitious electoral promises which played a key role in him being elected to office in a landslide victory three years ago.

In a statement, Rajrishi Singhal senior geoeconomics fellow at Gateway House think-tank in Mumbai,

This is a make-or-break budget in some ways. People were a little bit disappointed with the last budget. Now is the time for him (Modi) to start impressing people.

The previous budget presented by Finance Minister Arun Jaitley was perceived as safe, not having any bold announcements. Although the economy is still expected to grow at a rate of 7.6 percent in the current fiscal 2015-16, the government faces numerous internal challenges in addition to a weakening global economy.

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The Sensex has been declining steadily losing almost a fifth of its value since last year and the rupee has dropped to its lowest in two years. The government also has to address private investment in both domestic and foreign sectors which have dropped significantly. An important piece of legislation, the Goods and Services Tax (GST) bill which aims to simplify India’s complex tax regimen has been stalled for over a year due to the opposing party’s obstruction.

Soumitra Bhattacharya, joint managing director of Bosch India said that the passage of the GST bill is an immediate requirement and also added that a clear plan for the reduction of the corporate tax would also boost business in India.

The labyrinth of taxes in India is said to be a major concern for investor’s especially foreign investors and might be impacting Modi’s ambitious Make In India’ campaign to turn India into a manufacturing hub. Jaitley had announced a reduction in corporate tax from 30 to 25 percent last year and is expected to present the blueprint for achieving his targets in this budget.

In light of both domestic and global challenges, analysts believe that the government may not be able to achieve its fiscal deficit target of 3.5 percent of gross domestic product (GDP).


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