Social outlay may go up 10-12% in Budget
As part of a post-demonetisation gift, the government could increase spending for the coming financial year in health, education, women & child development and related social sector schemes by 10-12 per cent, Business Standard has learnt.
This would run concurrently with the increased layout on social sector by state governments, after the Fourteenth Finance Commission (FFC) recommended the latter spend more on schemes in health, education and similar segments. Most of these areas are state subjects.
The FFC had increased the devolution of taxes to states from the divisible pool, from 32 per cent to 42 per cent. However, it had reduced nontax transfers. In its report, the Y V Reddy-headed commission had said, “We urge state governments to use the additional fiscal space provided
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Rashtriya Madhyamik Shiksha Abhiyan National Rural Drinking Water Programme Beti Bachao, Beti Padhao by us in the tax devolution to meet such requirements.” After it accepted the FFC recommendations, the Centre had slightly reduced some of its budgeted spending in social sector schemes for 2015-16 and 201617. That is set to reverse. Budget makers believe proceeds from the latest voluntary disclosure scheme, income tax raids and whatever dividends the Reserve Bank of India can pass on will enable that extra spending, government sources said.
Since demonetisation, sale of FMCG products and consumer durables have been impacted. While it was earlier expected that the cash situation would improve in two-three weeks, liquidity remains tight and withdrawal limits continue to be in place. Most markets have lost sales ranging between 4070 per cent. As majority of the transactions at the retail level take place in cash, sales numbers for most consumer goods firms would decline in the near term, experts said.
Edelweiss Securities analyst Abneesh Roy says normalcy in stock markets can be expected from February. According to him, other than demonetisation, the interest rate hike by the US Federal Reserve has also led to a correction in the markets of emerging economies, including India. “The recent increase in crude oil prices may have played a role, too,” he said.
Experts say, increased spending by the government through higher allocation of funds in social sector schemes, announcement of sops for consumers like loan waiver and changes in income tax slabs or lower tax rates are currently expected from the coming Budget. This, in turn, may bring back investors confidence in the last two months of the financial year.