A lot rests on the upcoming Union Budget. India has emerged as an investment oasis in a subdued global environment, but the ripple effect of the recent global volatility has been felt here as well. Investors are circumspect and domestic stock markets are feeling the jitters. However, over the past year, the government has taken significant steps to revive the economy, and a job well begun is a job half done. The Budget presents a golden opportunity for the Finance Minister to take the positive sentiment forward. Growth impulses are looking better with the Manufacturing PMI at a four-month high and the RBI’s accommodative policy stance. So, it is important to capitalise on the opportunity and create a ‘snowball effect’ from the momentum of flagship schemes, such as Make in India, Skill India, and PM Jan Dhan Yojana. Among my top recommendations are rationalising direct taxes, sops for startups, focus on farm sector and key structural reforms in real estate, labour and MSMEs. Focus on boosting financial savings, adequate performance-linked recapitalisation for public sector banks, and a well-rounded Bankruptcy Code will set the stage for a quick revival.

Encouraging start-ups I expect some key sops for entrepreneurs and startups. We are witnessing a ‘startup revolution’ and this will be a significant leap forward. The first thing is to create warehouses, incubators and accelerators and to make investing in them attractive.

Further, there should be tax breaks for startup investors, because they are taking disproportionately higher risks.

Reviving savings growth We need to revive India’s savings propensity through targeted measures, which will improve the inherent economic strength of the financial sector and reduce our dependence on foreign capital. Towards this end, it will be important to increase disposable incomes by relaxing personal income-tax slabs to ₹5 lakh from the current ₹ 2.5 lakh — which could provide a fillip to household incomes, part of which will be diverted to savings. Another key measure is to enhance 80C limits to ₹3 lakh from ₹1.5 lakh.

Further, there is a need to increase inflation-adjusted post-tax returns for bank deposits by reducing the lock-in period eligible for tax rebate to one year from five; and enhancing the threshold for mandatory TDS on interest income to ₹50,000 a year from ₹10,000.

Finally, there will be a strong emphasis on the quality of fiscal consolidation — and the pragmatism of the fiscal arithmetic.

The writer is MD & CEO, YES BANK, and Chairman, YES Institute

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