5 reasons you should bother about Budget 2017

Aryan Kulkarni, a 20-something, was flying to New Delhi from Mumbai. In the seat pocket, he found a copy of a financial daily. As a sound engineer working at a music studio, Aryan never bothered reading any finance news. Words like ‘finance’ and ‘stock market’ scared him. As he flipped through the headlines, he saw the word ‘Budget’ mentioned in several.  

Like Aryan, many people may think: ‘Why bother?’. Here are five reasons why Budget 2017 should matter to you:

1) Government policy:

The budget is an account statement. The government reveals the income and expenditure incurred in the year gone by. What is the most important thing in the budget? It is the estimate that the government makes about the income and expenditure for the year ahead. The government announced the demonetization of currency notes in November 2016. So, there is likely to be a significant impact on government finances. Besides this, the Finance Minister will also list out important policy initiatives. These could affect your finances.

2) Personal income tax:

Given demonetisation, the government could ease the personal income tax burden for individuals. A cut in the marginal tax rates would provide relief to the salaried and individuals in the tax bracket. Watch out for the quantum of the tax cut. If the tax cut is sharp, the government may also introduce cuts in tax exemptions. These could affect your tax-saving investments, such as those under Section 80C of the Income Tax Act.

3) Other taxes:

The goods and services tax (GST) is the most important tax reform of our times. It had been reported that the government would implement it in July 2017. The GST may replace many taxes. Instead, you would pay only a single indirect tax. Some things you consume could become cheap. Other things may become expensive. This tax is likely to make a significant difference to the government’s finances. It may also affect the way you spend and the way the government earns tax revenue.

4) Economic prospects:

Economic growth prospects in India are linked to the state of the government’s finances. It is desirable for the government to have enough money in hand. The funds could push investments in infrastructure, healthcare, and education. This could kick-start the economy. There will be a demand for goods and services. This may lead to the creation of new jobs. You have to watch out for the impact of this spending on government borrowing. If the government borrows within earlier estimates, it will be good for the economy. If the government overshoots the estimate, it would increase the government’s borrowing. This would lead to the interest rates holding firm.

5) Personal finance:

Suppose the government’s fiscal deficit meets the targets. Then the Reserve Bank of India would be able to bring down borrowing rates. For that to happen, the government borrowing has to remain within the limits set in Budget 2016. From a personal finance standpoint, low-interest rates would bring down your EMIs. But you will get lower returns on fixed deposits and other instruments that offer a return linked to market interest rates. This will have a direct effect on your savings.

Source: Simplus Information Services