Is Budget that big an event to look forward to and build expectations? History, atleast in the last five years, suggests that expectations tend to head north ahead of the budget, which translates into a pre-budget rally. Four out of five years in the past, stock markets have rallied. The year 2001-02 was an exception in the sense that the country was recovering from the Gujarat earthquake that rocked sentiment on January 26th, 2001. Given this backdrop, should expectations soar this time around too? Before delving into that, consider key budget measures in the last three years…
Budget 2000-01 | Budget 2001-02 | Budget 2002-03 |
Other fundamental changes
|
Housing sops
|
Section 88 benefits for individuals earning above Rs 500,000 removed. For person's earnings between Rs 150,000-Rs 500,000, it is 10% (earlier 20%). A 5% security surcharge imposed.
Stock market related
|
So what do all these measures mean for India? While the Finance Ministry has to be commended for simplifying the complex excise and customs duty structure that invariably lead to tax evasion, not much has been done to tighten its own belt. Fiscal Responsibility Bill that was aimed at controlling government expenditure has been diluted to a large extent. Inconsistency, on the other hand, has been the hallmark. The most inconsistent budget measures in the past have been dividend tax and surcharge on income tax, as apparent from the table above. Instead of expanding the taxpayer base, the focus has been on how to get more out of the existing taxpayers. Efforts to improve tax collections as a percentage of GDP have met with little success.
What is funny is that while most government functionaries agree that there is a need to speed up reforms and tightening of belt, the FM’s office so far has been unable to show the will to take on hard measures, be it bringing big farmers under the tax net, or knocking off subsidies. While there is no doubt that we have come a long way since days when talking of labour reforms was taboo, half baked measures continue to mar India’s prospects vis-à-vis’ the world.
So as always, we look to the North Block to bite the bullet. But then, one eye of Mr. Singh is likely to be on the coming elections. Given this backdrop, there is a feeling that politics may score over the economy. But for how long?
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