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2014 budget – The expectations!

Budget

Budget

The New Government is in place. So, obviously a new finance minister too is in place. Even more obviously the expectations have begun about what the upcoming budget holds in store for us, the citizens of India.

 

Although the way in which the government has been given a majority, many people expect drastic changes to take place, the contrary may actually be true. Why? Being a new government that is equally new to governance at the centre, the FM may resist from taking any drastic steps without getting a stronger hold on the system.

 

At the same time, the fact that it is a new government could also motivate the government and the FM to come out with drastic changes, which can be tough in the short term but positive in the long term, at the beginning of the term so that the new ideas can bear positive results by the time the next general elections come up.

 

Governments may change, the finance minister may change, but our basic expectations from the budget won’t change.

Some of them are…

 

  1. Higher income tax exemption slabs – The biggest expectation from the budget as always will be for increasing the income tax slabs.  Income tax is the most tangible and visible form of our hard earned money going to the government. Hence, the eager wish to minimize that . Basic exemption limit could be increased from 2L to 3L . At the same time we could have positive news in the form of increase in the Section 80 C slabs from 1L to 3 L. This will encourage realistic savings and possibility of investing in various avenues, which can help tax payers combat inflation.

 

  1. Lower interest Rates:  The second most common expectation from a budget is that measures are taken by the finance minister, which can encourage the RBI to reduce lending rates so that we could buy the house that we do dream of, and the car that we have been eyeing every time we cross the showroom. The rate reduction may be a possibility as the government is keen to boost the key sectors including real estate and automotives. Reduction made possible in lending rates will in turn be able to improve a whole range of industries, which are directly or indirectly related to these two sectors.

 

  1. Price reduction/Curb on inflation – Every FM is expected to come with a magic wand, which could somehow reduce price rises and get us our bread at lower prices. It is ironical that we expect our HR managers to give us a pay rise every year, but at the same time we expect the neighbourhood shop to keep reducing prices. In spite of all these arguments, it is not very probable that the prices will come down in the near future as drastic and tough measures to induce growth will inevitably lead to higher prices till all the industries stabilise and start seeing positive cash flow. Once this happens, the industry will be able to reduce prices to increase volumes while maintaining their profits.

 

  1. Once we have exhausted all the wishes that satisfy our personal needs we look further into our expectations in the public domain. The most key ones among them being better infrastructure in our cities. Roads and electricity being top most priority. This wish could see a lot happening in this budget as rapid development of both these sectors will directly boost every aspect of the economy. To this effect we may see the introduction of Infrastructure bonds.

 

  1. The common man is also expecting the new finance minister to bring in widespread reforms in the financial services sector. The expectation is also to make the sector stronger and fool proof. A lot of small Investors have shied away from financial investments due to various fears. Better laws and regulations could lead to more savings being routed to financial products thus increasing overall liquidity.

 

  1. Fuel prices – With a growing middle class that has seen most households having at least one two wheeler and one four wheeler, the monthly fuel bill has become a sizeable component of the family budget. There is great hope on the finance minister waving a magic wand and reducing the prices of petrol for the sake of our personal vehicles and diesel, so our transporters can reduce prices and get us vegetables and grocery at lower cost.

 

  1. “My home” – A roof above the head. The dream of probably every Indian. The past few years have shown an overall slowdown in people buying their first house. The reason was three fold
  1. Higher interest rates
  2. Anxieties of real estate fraud
  3. Uncertainty about the financial future of the company.

The expectation from the FM would be to give a boost to this sector by providing impetus to the real estate sector with sops and to strengthen regulations.

 

As is the case with most budgets there are thousands of expectations. Most of the times it has been wishful thinking, but, what makes this budget different is that most people expect the FM to actually satisfy their expectations as the government has a strong majority unlike previous regimes.

 

It is time for change. Fundamentally most Indians are ready to take a bitter pill this budget if it means a better future. But then, we can only hope the FM takes his decisions based on the longer term and not the short term (what with elections in many important states).

 

 

 

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