Aid to individuals should ease inflation and unemployment
New Delhi: In an environment of high inflation due to rising input costs and high unemployment caused by the Covid-19 pandemic, the government should provide relief to individuals and increase disposable income to stimulate consumption in the budget of the Union for the financial year 23, which will be tabled in Parliament on 1 February.
The government could raise the limits on the standard deduction from Rs 50,000 to Rs 1 lakh, SMC Global Securities said in a report.
It expects an increase in the tax benefit on home loan interest and principal repayment of Rs 50,000 each, above the current level of Rs 2 lakh and Rs 1.5 lakh, respectively. The government can grant an interest subsidy of 3 to 4% on mortgages for three years.
The budgetary allocation for the railways is expected to hit a record high in the next financial year as the government prepares to support a major overhaul of the national carrier.
In addition, there is a possibility of reducing excise duties on petroleum products. The market is also looking for support measures for sectors such as housing, autos and auto accessories, and LIP-related measures in several sectors.
The government can announce the monetization of public sector enterprise (PSU) assets under the National Monetization Pipeline (NMP). It can also monetize the homes and commercial real estate it owns through floating REITs.
The disinvestment plan should be specified with the budget. The government is trying to narrow the gap through its divestment plan. So far, the government has been able to raise Rs 9,330 crore by selling its shares in PSUs, according to the report.
The IPO of LIC, which is expected to hit the market at the end of March, could help the government significantly by raising more than Rs 1 lakh crore.
The government’s total divestment target is Rs 1.75 lakh crore for the current financial year.
Significant pending divestments, apart from LIC’s IPO, include IDBI Bank, Bharat Petroleum Corporation, Pawan Hans, Shipping Corporation of India, BEML and Container Corporation of India, among others, according to the report.
This budget is expected to stimulate both the rental housing market and the affordable housing sector. The sector has huge expectations for the upcoming budget, such as industry status requirements and ease of funding. A one-stop clearance mechanism has been a demand for many years now.
Globally, the price of fertilizers has risen dramatically, hurting import-dependent India. The price of urea, which is the most commonly used, has tripled to $990/ton while the price of DAP has doubled to $700-800/ton compared to prices a year ago. and half.
Additionally, the recent surge in natural gas, which accounts for 80% of the cost of urea production, is expected to continue to drive up the cost of urea production.
Currently, farmers are facing a shortage of fertilizers and the Department of Agriculture has an urgent intervention from the Center to ensure an adequate supply of fertilizers.
Farmers are already in distress due to the pandemic which has hit rural India hard, and rising prices and shortages of fertilizer would further impact their financial situation.
The government should therefore focus on improving farmers’ incomes through increased support for the agricultural economy. This will benefit the entire agricultural input ecosystem i.e. seeds, fertilizers, crop protection, chemicals and tractors etc.
In recent budgets, the government has increased the budget allocation for fertilizer subsidy and in the upcoming budget, we are planning a fertilizer subsidy of Rs. 1.3 crore lakh, according to the report.
In addition, the government may also increase agricultural credit to Rs 18 lakh crore, from Rs 16.5 lakh crore for the current year, continuing the same policy adopted earlier, to help the farmer recover from the pandemic. , according to the report.
The ECLGS (Emergency Credit Linked Guarantee Scheme) was introduced by the government in March 2020 to provide financial support to the pandemic-affected MSME sector, which was later extended to other struggling industries while raising the limit credit from Rs 3 lakh crore to Rs 4.5 lakh crore.
The program is extended until March 2022. Tension in the sector is still very high and many eligible MSMEs are in various stages of restructuring.
SMC Global Securities expects the government to extend the program until March 2023 or until the economy picks up, which would allow banks to continue liquidity support.