SBI Report Urges Fiscal Prudence, Reform, and Tax Relief Ahead of Upcoming Budget

An SBI research report emphasizes the need for fiscal prudence, tax alignment, agriculture support, and banking sector reforms in India's upcoming budget. It calls for a 4.9% fiscal deficit target, tax parity, and a comprehensive mineral strategy to drive sustainable growth and economic resilience.

As the central government prepares for the upcoming budget on July 23rd, a research report by the State Bank of India (SBI) highlights crucial areas that need attention to drive sustainable economic growth and development in the country. The report emphasizes adherence to fiscal prudence while continuing on the path of fiscal consolidation, suggesting a fiscal deficit target of around 4.9 per cent.

The SBI report states, "Government should focus on adherence to fiscal prudence and continue on the fiscal consolidation path, but at the same time refrain from obsessing too much over the fiscal stance." It advocates for aligning personal income tax rates with corporate taxes and gradually transitioning all payers to the New Tax Regime. Additionally, tax parity for bank deposits is recommended to attract more savings and boost household financial savings.

For the agriculture sector, the report highlights the need to address issues such as financing, livelihood support, and the Agri Credit Guarantee Trust Fund. It notes the politicization of the Minimum Support Price (MSP) issue and suggests exploring alternatives, as current MSP policies reduce trade and export competitiveness. The report states, "The issues innate to MSP mechanism viz. needless politics, disincentivizing private investment, neglect of non-MSP crops, reduction in export competitiveness & burden of trade disputes alternative mechanism needs to be looked into vigorously, viz. obligation to private parties for buying crops at MSP."

The report also suggests developing a comprehensive mineral strategy, especially for critical minerals, to ensure mass employment and secure the supply chain from exploration to recycling. It mentions that reforms over the past decade have revamped India's banking sector but calls for continued reforms, including the divestment of public sector banks (PSBs) and the stake sale in IDBI Bank.

The report states, "After a decade of transformative changes, the Indian banking system stands much healthier ready to scale up to meet emerging challenges as the country embarks on the Viksit Bharat sojourn." Moreover, it recommends changes to the Insolvency and Bankruptcy Code and the promotion of Production Linked Incentive (PLI) schemes for MSMEs to reduce import dependency.

The report concludes that incorporating these suggestions into the upcoming budget can lay a strong foundation for sustainable growth, promote financial inclusion, and drive economic resilience in the post-pandemic era.

(With inputs from agencies.)