Mr Jaitley, Here’s How You Can Increase Earning Without High Taxes

For Finance Minister Arun Jaitley, this year’s budget is like walking on a double-edged sword. The challenge before the government is to ensure that the tax rate does not increase, but at the same time, the government's earnings must increase. How will they make this happen?

Increasing tax will be difficult when it comes to political gains, as this will be the last budget of the Modi government before the Lok Sabha elections in 2019. Hence, increasing the taxes will obviously be very unpopular move.

It is being said that the government might declare populist packages like crop insurance or increasing the minimum support price of the produce, but this will cause a huge impact on the fiscal. How will the government balance it?

Anil Singhvi, Chairman of ICAN Investment Advisors Pvt Ltd, explains what can we expect from Union Budget 2018.

What Should the Government do With the Budget?

Two things should be at the centre of Union Budget 2018: Keeping a check on fiscal deficit and revenue generation. Since the government has rolled out GST and all the indirect taxes fall under its umbrella, it is no longer possible to generate revenue through changes in excise or custom.

However, the biggest concern raised by Singhvi was over the poor condition of the banking situation in India.

Banking System Needs a Long Term Solution

Singhvi pointed out that there is a significant delay in recapitalisation of the banks. Even after the implementation of the bankruptcy code, the banks have not made much recovery. Until the banks are sufficiently recapitalised, they won’t be able to provide loans, which in turn will lead to lack of job creation and private investment and hence, there will be no capital formation.

Further, Singhvi argued that recapitalisation is a like a band-aid for the current situation of banking system and a long term solution is needed. He suggested that mergers of underperforming banks can be the most effective solution to the current banking crisis.

I expect that this action (merger of underperforming banks) needs to be taken through an announcement in budget over the next six-eight months.

Anil Singhvi, Chairman, Ican Investment Advisors Pvt. Ltd

How to Increase Revenue Without Increasing Taxes

The union budget is basically the balance sheet of the Government of India. In the budget, they give an account of the work they have done in the current fiscal and how much do they plan to spend in the next fiscal year.

Singhvi suggested that since this is the last full budget, the government may provide some sort of tax benefits for people in the income slab of Rs 5 lakh or under. But the question still remains, how to generate revenue?

The solution put forward by Singhvi, is that government should cash in on its stakes and shares in Public Service Undertakings (PSUs).

Government has a lot PSUs and a lot of shares. This the time that they should cash in on them. If you reinvest them in agriculture or infrastructure, then it will generate jobs. The return on these investments will be higher than holding the shares of those companies.

Anil Singhvi, Chairman, Ican Investment Advisors Pvt. Ltd

Video Editor: Sandeep Suman and Vivek Gupta