A Budget as meek as it could be!
In this issue:
» Who were the major inflation contributors in 2011-12?
» What does the Budget have for retail investors?
» FM doubles customs duty on gold imports
» Employees will have to bear with this sharp rate cut
» ...and more!
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At one point during the Budget speech, Finance Minister Pranab Mukherjee borrowed a Shakespearean line before presenting some of his proposals: "I must be cruel to be kind." But the Budget he presented was just too meek to wheedle any kind of change. He played it safe, keeping away from any radical reforms that could take the economy in a new direction. In other words, the game of politics won over economics and reason.
The Indian government failed terribly on the fiscal deficit front for the financial year 2011-12. Against a projected deficit of 4.6% of Gross Domestic Product (GDP), the year ended at about 5.9% of GDP. The deficit target for the next fiscal has been pegged at 5.1%. What is even worse is the fact that the Budget showed no inclination towards bringing down expenditure in the form of subsidies.
Also, there were no concrete steps to expand the direct tax net. Even the disinvestment target of Rs 300 bn was quite disappointing. How the government will achieve this remains obscure. But unfortunately, the proceeds from divestments still remain critical for capital expenditures. Moreover, the implementation of key measures such as the Goods and Services Tax (GST) and Direct Tax Code (DTC) has been left to a later stage.
So forget the mandate as per the Fiscal Responsibility and Budget Management (FRBM) Act to bring down fiscal deficit to 3% of GDP. That is already long forgotten. Will the government even be able to meet the 5.1% target? We can only pray. All in all, Budget speeches, akin to the Monetary Policy Review, are increasingly becoming mere rituals with no substance.
How would you rate the Union Budget 2012-13? Let us know your comments or post them on our Facebook page / Google+ page.
01:13 | Chart of the day | |
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Data source: Economic Survey 2011-12 *April to January 2012 |
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This move is certainly a precursor to the proposed Direct Taxes Code. But it is also an attempt to bring in more retail investors into the markets. It is indeed sad that Indian markets have to still rely on Foreign Institutional Investors (FIIs) inflows for its daily movements. Thus, if it has to have any hope of reducing this dependence, measures like the ones taken in the latest budget are more than welcome, we believe.
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But the buck does not end here. The Finance Minister has also decided to widen the service tax net. Only services in the negative list would be exempt from the service tax. Services that are exempt include school education. Good for that. And to add to this, the tax rate has been increased from 10% to 12%. The only relief that the common man has is the savings due to the change in income tax rate slabs. But even there the savings is paltry as tax slabs have not been radically revised.
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04:46 | Today's Investing Mantra |
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9 Responses to "A Budget as meek as it could be!"
SUDHAKAR
Mar 17, 2012When the Rail Budget & This one are passed, and also diesel deregulation takes effect,we will slide into double digit inflation, once again. That leaves no room for RBI to reduce interest rates and low growth is the consequence. Pretty sure -We will be back to the days of persistent stagflation.
Jaykumar
Mar 17, 2012Today's politicians dont have the interest of the country at heart. They survive by doling out subsidies to the vote banks to remain in power. The snow ball effect of this policy will be dangerous in years to come. By that time we will miss the bus to be a prosperous nation. The budget is insipid with no concrete steps towards economic reforms, which is the need of the hour.
Abhishek Jain
Mar 16, 2012Union govt is eyeing 2014 elections. That's why Fin. min. has deferred all goodies for 2013. They know that public only remembers recent happenings, they'll make general public happy in 2013 to garner votes.
Sundaravaradan S
Mar 16, 2012Hi,
Whatever comments given are true and good; but only talks about the -ve aspects of the Budget, only!
IF the Budget was spelling Good Measures, then, we would be saying the key is in IMPLEMENTATION! true!
I only hope, Pranab is clever and did not want controversies on Budget day, just like Infosys, it PERFORMS better than promised!
Budget should become a boring excercise and forgotten, as it is! The USEFUL Bills should be IMPLEMENTED when the Allies of Govt are sleeping!!
Hoping for the better times!
Suresh Kumar
Mar 16, 2012This budget is anti-rich, anti-poor but pro-politicians. Anti-rich as 2% additional duties would make consumer goods expensive, anti-poor as inflation will remain in double digits due to high fiscal deficit, pro-politicians as they could take the credit for not hiking diesel prices but indirectly inflating prices of everything.
Its high time, a WHITE paper is published on BLACK money, so that fiscal deficit and inflation are brought down.
Ashish Pandey
Mar 16, 2012seems govt has decided to play safe keeping in sight parliamentary election after facing rejection in recent assembly elections. but they forget that they are turned down only because of this indecisive approach and meek stand on many issues of national importance. where they are suppose to take firm stand they kept on avoiding decision making. I've never felt so directionless before as a citizen. they are not even doing politics, rather they are engaged in detrimental polytricks.
anupam garg
Mar 16, 2012very informative newsletter giving brief, yet broad outlook on the budget components...
Albert
Mar 19, 2012Our FM is using a precedence set in the 70's to justify retroactive change in tax laws. Are we still living in the 70's? He is hell bent on changing the rules of the games (retroactively) because the govt lost the match against Vodafone. Convenient, isn't it? Next time we lose a cricket match, let the BCCI use its heft to change the rules... something like... whoever scored less runs be declared the winner. Mr. FM, whose initials are PM, is doing all this to fight what he calls "fiscal chaos." So, who created this fiscal chaos to start with? The UPA, of course, with its populist schemes and subsidies to keep itself in power. Now Mr. FM is creating chaos is the entire country by continuing to rob Peter to pay Paul. How long can this continue? Is this what a true democracy looks like? No, this is nothing by dictatorship by the masses. A government which robs Peter to pay Paul can always depend on the support of Paul. And so the great Indian story continues... its business as usual... taxing the middle class to death who gets absolutely nothing in return and has to fend for itself for simple things like water, electricity, education and basic health care. It's time for this govt to be voted out of office.
I say remove all subsidies, cancel all populist schemes, reduce the size of govt by half, get rid of the 50% tax on petrol and abolish all income taxes.