With an aim to boost economic growth, the government is likely to push forward with mild cuts in personal Income Tax rates to enhance consumption and a concessional Corporate Tax scheme for manufacturing hubs and FDIs to further the 'Make in India' strategy in Budget 2025-26, according to a private sector report.
Watch for higher customs duty on gold and easier FDI norms. Some tweaks in the personal Income Tax slabs could be done to focus on increasing disposable income for the middle-income strata, " said the report of Emkay Global Financial Services.
The report states: "We will watch for some sweeteners in personal tax rates, concessionary corporate tax scheme for manufacturing hubs/FDIs, possibly higher import tariffs on China-sensitive products, while lowering custom duties on industrial intermediaries, ".
This will be the new Budget, coming on the back of the government again overachieving its gross fiscal deficit target in FY25 at 4.7 per cent of the GDP vs 4.9 per cent in FY25 (RE) amid solid personal Income Tax revenue stream.
Based on the fiscal glide path, the FY26 fiscal deficit to GDP ratio will be targeted at about 4.5 per cent. This has been a consistent trend of the government over achieving the fiscal target of the last couple of years, the report also points out.
According to the report, the Government's net borrowing in FY26 would be lower than what happened in FY25 at Rs 11.15 lakh crore, and small savings would most likely fund around 24 per cent of the fiscal deficit. The report also expects the RBI dividend to be in the same ballpark as FY25 at around Rs 2.1 lakh crore.
The policy going ahead will remain fixated on improving growth prospects in the near term, encompassing strengthening of investment dynamics combined with the reining of fiscal discipline, reports say.
To that effect, the government will still focus on delivering maximum fiscal impulses to push forward growth while giving an added support package to some ailing sections of the economy, it adds.
Gross taxes would expand around 9 per cent, gross tax/GDP to around 11.7 percent.
Reportly, this one sees raising asset sales-what would function as a conduit, for example-for infrastructure monetisation, disinvestment and strategic sales as well as resource optimization as the least growth-repressing tools for deficit consolidation.
Spending proportion of revex over capex may be somewhat higher than seen in post-Covid years till FY24, with focus on human capital and the agricultural sector, according to the report.
The focus will be on rural spending, which will have a much faster fiscal multiplier effect and another leg of ‘Make in India’ push for industry is expected.
"We expect capex loans to states to be similar to that in FY25, with the biggest increase in allocation seen in Defence, " the report states.
Besides, the focus will be on welfare, rural, affordable housing, MSMEs, human capital (health, education), the report added.
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