Arvind Subramanian, Jaitley’s chief economic adviser, on Tuesday advocated slashing personal income tax and accelerating cuts in corporate tax rates. He cautioned, however, against pursuing debt-fuelled fiscal expansion.
Still, economists are pencilling in a federal fiscal deficit of 3.3% of GDP for 2017-18. That would be higher than the 3% pledged earlier but lower than 3.5% that the government has budgeted for the year soon to end.
“Expectations are running high for an expansive budget,” said Radhika Rao, an economist with DBS Bank in Singapore.
The rollout of a nationwide goods and services tax (GST), expected in July after years of delays, could also weigh on economic growth. Countries that have introduced GST in the past have often faced a relative economic slowdown before the benefits of a unified tax regime feed through.
