In the light of the COVID-19 pandemic, people are all the more excited and looking forward to the budget. The impending issue of growth versus fiscal disciple will be something that will be talked about a lot and debated upon by the Finance Ministry and the government while framing the Budget for 2021. The market analysts are looking at the past budgets of the ruling party and are hoping that the winner among the two will most likely be growth but the firm belief that the ruling party has on the fiscal discipline can make the budget go either way. In a conclusion, they think that the BUdget 2021 might just be a balancing act between the two.
Due to the liquidity support, the fiscal slippage to the economy was witnessed. It has lowered the fiscal deficit to about 7.5% and so it is important to see how the Finance Ministry of the country will work on the budget and what measures they will employ to bring back economic stability and if they will bring the fiscal deficit back to the target of 3.5% for the Financial Year 2021. Even though the next step will be around 5.2 percent in the Financial year 2022, the path and measures concerning it can shape how the equity markets and fixed income look at the 2021 Budget.
The combined deficit of Central and State is possibly around 12 percent for the financial year 2021 and that leaves very little room for movement or change. Due to the low tax collections, GST and Direct taxes will also be lowered by an approximate value of 14 percent and 17 percent respectively.
There are a lot of aspects of the economy that can be considered when making the 2021 Budget, the reforms that can bring in long term economic stability. Given the global trend, the taxpayers are hoping that no Coronavirus Cess is introduced. However, it can be seen that the Cess might be introduced in this budget, especially for the high brackets of incomes.