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This is not the big bang the market was hoping for. It's a whimper. As Pranab Mukherjee concludes his speech, it's clear that there have been no serious efforts to fix anything.
By R Jagannathan
LAST WORD: Sorry, folks. This is not the big bang the market was hoping for. It's a whimper. As Pranab Mukherjee concludes his speech, it's clear that there have been no serious efforts to fix anything. Fuel and fertiliser subsidies have not been cut. Fiscal consolidation is a mixed bad. Higher taxes will raise inflation by a bit. This budget won't achieve much. Your tax reliefs are piddly. Forget the pizza. Order more booze to drown your sorrows.
12.43: It's becoming clearer that budget will do nothing to change the course of the economy. It is all incremental stuff so far – nothing to set the Hooghly on fire (Mamata di, please note), or the Jamuna, for that matter, or the Mithi (Mumbaikars, please note).
12.42: No change in peak customs duty of 10 percent – but in customs the exceptions are the rule. So don't worry about this number.
12.40: Overall service taxes raised to 12 percent. This will surely push up inflation since services account for 59 percent of the GDP. General excise also up to 12 percent. Big cars to cost more – excise up from 22 to 24 percent. Market should know fiscal consolidation means some pain.
12.36: Bollywood exempted from service tax in some copyrighted stuff.
12.35: Here comes the big blow. Service tax to have negative list – only 17 services exempt. Your five-star barber may apply service tax before giving you that Amitabh Bachchan cut.
12.30: A bit more for markets. Securities transaction tax (STT) – the stock exchange toll fee for buying and selling share – is cut by 20 percent. Just crumbs for traders. STT is now 0.1 percent for delivery trades.
12.25: Finally, taxes. Rs 2 lakh zero tax, Rs 2-5 lakh – 10 percent, Rs 5-10 lakh – 20 percent and above Rs 10 lakh – 30 percent. Interest income from banks tax-free upto Rs 10,000. No change in corporate taxes.
12.20: The big number, fiscal deficit at 5.9 percent – that’s 1.3 percent higher than 2011-12 budget estimate. Next year's figure is 5.1 percent.
12.15: Ah, black money. He plans a white paper on black money. That sounds like tough action. FM says taxman can reopen your foreign accounts for 15 years. Except more bribe calls if you have opened than Swiss account.
12.10: Chidambaram – is all ears trying hard to understand what Mukherjee is saying. FM should ask Omita Paul to send him a transcript.
12.05: Money for National Rural Health Mission (NRHM) increased to Rs 20,820 crore. Thought Maya's henchmen had already had their fill of this cash? Kushwaha, saab, what's going on?
12.00: Barah baj gaya - and he’s still droning on and on about rural stuff, infrastructure, etc. Lok Sabha guys begin to nod off. Everyone is waiting for the real stuf – taxes, prices, concessions, the big blows… Death where is thy sting?
11.55: Food security – Sonia Gandhi‘s dream plan – is coming up. Rs 15,800 crore for nutritional support for children, even more for mid-day meals. More foodgrain storage to be created. 2 million tonnes of capacity. The rats at least should be celebrating.
11.45: Agriculture next. Outlays, outlays, blah-blah. Last time he put Rs 300 crore in several agri-schemes and green revolution stuff. He said every scheme got Rs 300 crore since '3' was his lucky number. We know what luck he finally got last year. With luck like his in 2001-12, when he missed every economic target despite a bountiful monsoon, who needs back luck? Another loo-break is in order.
11.41: Airline industry sops coming up – Vijay Mallya, Air India, listen carefully – they can now raise external commercial borrrowings, and FDI will probably be allowed in aviation. All this is pie in the sky. This means instead of soaking SBI and Indian banks, airlines can sink American and European banks. Fat chance. Aviation is a stretcher case – need surgery. It is not amenable to revival by aspirin.
11.40: Power sector's coal problems are solved, he says. Coal India will be fleeced to feed power plants.
11.35: Here comes the infrastructure bit. Infrastructure debt funds being set up. Telecom towers will get viability gap funding – so now Niira Radia's conversations can be tapped easier by the tax department and leaked to Open and Outlook mags. Rs 60,000 crore infra bonds coming up next year. Tax-free. So load up on it before it goes out of fashion.
11.33: He is going to recapitalise banks with over Rs 15,000 crore – so that they can bail out Vijay Mallya and other aviation and other losers.
11.32: New Rajiv Gandhi equity scheme to lure retail investors investing directly in equity. Rs 50,000 limit will get 50 percent income-tax deduction. He is probably beginning to soften up the markets - before hitting them with some bad news. A minor gain for small investors: they can e-vote in companies. Not that they can stop the rot and loot by management – when government is busy doing the same in public sector companies like ONGC.
11.30: Mike isn’t working – but he wants to read previous two paras. Speech rolled back. But we didn't miss anything.
11.22: He plans to raise Rs 30,000 crore from disinvestment this year. Presume LIC won't be expected to bail him out again – as in ONGC. Direct Taxes Code and Goods and Services Tax are still in the future.
11.18: Pranab says he will provide for food subsidy, but economy may have to pay for the other subsidies. This is big, if it means petroleum deregulation, or something else. He is also talking cash transfers to the poor. Subsidies will be cut to 2 percent of GDP, and 1.7 percent in three years. If he does this, prepare for inflation to shoot in short run. The market is smelling a hard budget, and is cautiously optimistic of the fiscal decficit.
11.16: He is saying India's inflation is largely structural – does that mean he is throwing up his hands on the problem? But he says average inflation next year will be lower. The Lord be praised. But he said that last year, too. But wait, he has begun talking about crude prices and fiscal consolidation. Does this mean he will raise diesel prices?
11.15:Here's comes the pain. He's talking of hard decisions. Surely he's not talking about Mamata-di? Dinesh Trivedi must have shared parts of the budget speech with him – or vice-versa.
11.10: He said the usual thing. When anyone says growth is slowing, he will say rest of world is growing even more slowly. India is andhon me kaana raja.
11.07: He starts speech again, but you didn't miss anything. He's talking about Mid East and crude oil. We know all that.
11.05: Usual ruckus. How can budgets be interesting without MPs making themselves hoarse with objections. FM called then petulant children yesterday, he needs new descriptors today…
11.00: He’s there. Speech in hand, glass of water at hand. As Pranab rises to present his budget, put on your seatbelts. But just a small window of opportunity for loo breaks, ordering that pizza (don’t worry, Domino will deliver in 30 minutes, and by then the FM wouldn’t have got to the stuff we really want to hear about: taxes, and prices of things we want to buy.
10.55: Only five minutes to go before H-Houd and Pranab's BS. BS is not short for what you think it is – it's budget speech.
Forget you and me. The first guy the FM has to please is Subbarao of RBI – Subbu. If, at the end of his speech, we get to know that the Guv called up the FM and said "Subbu khush hua" – the markets will break into a jig.
10.50:Questions, questions before FM grabs his speech booklet, and sips water before reading the stuff. Will he please the markets? Will there be something for the aam aadmi? Will he do Soniaji’s bidding or do a Dinesh Trivedi on his boss? And what will Kolaveri Didi do if he raises fuel prices? Will she explode?
To be sure, the only guy who will be watching the budget like a hawk is Reserve Bank Governor Duvvuri Subbarao. He has already told the FM – in coded language that only central bankers and FMs understand – that if the budget does not make serious efforts to close the budget gap – raise diesel prices, cut subsidies, etc, things you and I don’t like – Subbu will hold back on cutting interest rates. Goodbye cheaper home loans, et al.
Yesterday, the Guv was in Kolaveri mood – and refused to cut rates.
10.45: On tenterhooks. What will Pranab-da do? Even more scary. You know what happened to Dinesh Trivedi. PM complimented him on the rail budget and he is getting the sack. Hope nothing like that happens to Pranab-da. If Manmohan Singh pays him the highest tribute, he’s done for.
10.30: Okay folks, here we go. It is just 20-25 minutes to the start of Pranab-da’s seventh budget, billed as a make-or-break one. It’s nothing of the kind. Life will go on. But if we don’t keep saying this, you won’t watch TV or log in to Firstpost, or think the budget is a big deal.
The markets are still in positive territory – they obviously don’t know why they are celebrating. If Pranab does something sensible – fix the budget, raise taxes or cut expenses – someone or the other will be hurt. The markets will be moping after the budget – whether it is a good one or bad. But don’t worry. They will get over it in the coming days. There is too much money chasing stocks this year.
If you ask the cognoscenti, this is what they will say they want to see from Pranab-da: fiscal consolidation (code for cutting subsidies and expenditure), something to cheer business and get it to start investing (tax cuts, tax cuts, tax cuts), clear signals on reforms (foreign investment, FDI in retail), a bone or two for the markets (STT cut, and only a moderate increase in long-term capital gains taxes), and at least a few crumbs for ordinary taxpayers (you and me).
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