SBI economists bat for tax-free Union Budget
Ecowrap, the research wing of the country’s largest lender, State Bank of India (SBI), is rooting for a tax-free Budget this time
Mumbai: Ecowrap, the research wing of the country's largest lender, State Bank of India (SBI), is rooting for a tax-free Budget this time.
"There must not be any new taxes in the Budget! Let us have a tax-holiday Budget, with carefully crafted policies for immediate fiscal lubrication. This could include an honest attempt by the Government to settle the tax litigation cases once and for all and also ensure all pending payments to parastatal entities are made in a time bound manner! This could be the biggest game changer," says a report prepared by Ecowrap, which is headed by the SBI group's chief economc advisor, Soumya Kanti Ghosh.
The report has advised the government to focus on the rural sector by improving the credit delivery mechanisms for small and marginal farmers for loan up to Rs 3 lakh. Simplification and rationalisation of means for availing the KCC loan facility should be thus a major reform for the benefit of small and marginal farmers. We also need to have both a price and income support for the farmers. MSMEs with 70 per cent turnover from exports could be awarded special status.
For the banking sector, uniformity in rules in recognising bad assets of CBDT must be aligned with RBI norms to unlock banking capital. For senior citizens, some tax incentive for savings is a necessary sine qua non and that has minimal fiscal implications. There is a need for phased reduction in Government share holding to 51 per cent in PSBs. As per the first advanced estimate of the GDP, real GDP will contract by -7.7 per cent in FY21, and nominal GDP growth is expected at –4.2 per cent. Accordingly, we project for FY22, nominal GDP would grow by 15 per cent to Rs 224.04 lakh crore.
Current trends in the GDP for FY21 will translate into Rs 3.2 lakh crore net revenue shortfall for the Centre this fiscal and at the same time expenditure is higher by around Rs 3.3 lakh crore, thus taking the fiscal deficit to Rs 14.46 lakh crore and with new revised nominal GDP estimate for FY21 it will be around 7.4 per cent of GDP, the report says.
Taking all the assumptions given the current data, it appears that States will end with an overall shortage of around Rs 3.00 lakh crore in tax revenue.