Budget focuses on infra, agriculture: Parag Parikh
The budget is an exercise where the Central Government lays out its resource raising and spending plans for the coming financial year. However it has historically been more than just that.
February 28, 2011 / 17:49 IST
Rajeev Thakkar, CEO & Director, Parag Parikh Financial Advisory Services Limited gave his views on how he read the budget presented by finance minister Pranab Mukherjee for financial year 2011-12.
The budget is an exercise where the Central Government lays out its resource raising and spending plans for the coming financial year. However it has historically been more than just that. As part of the resource raising projections, various direct and indirect taxes would be tinkered with, various populist schemes would be announced in the spending plan and there would be grandstanding on policies and reforms announcements. As India moves to a more predictable tax regime, some of the associated budget excitement has gone away. In the current budget, Service Tax and Excise rates have been broadly kept at 10%, there is not much change in the Customs Duty rate and the hike in Income Tax slab rates barely keep up with inflation. The attempt in recent years has been to make the budget something of a non-event.The focus on investments in infrastructure and agriculture is welcome and the key will the speedy implementation rather than just allocation of funds. The increase in limit on FII investments in corporate bonds for infrastructure has a potential to give a big fillip to the removal of infrastructure bottlenecks plaguing Indian industry. The liberalisation of investment norms into mutual funds by foreign investors also has the potential to attract a lot of investments into India.The introduction of seven amendment bills relating to financial sector laws and the proposed introduction of the Companies bill are welcome in the context of taking the reforms process further.Some of the small measures like the focus on public transport, incentives for hybrids and electric cars and one time financial grants to many educational institutions are good from a directional perspective though they may not make a very large immediate impact.The budget speech has reiterated the intent to pass the Direct Tax Code (DTC) and the Goods and Services Tax (GST). The date from implementation of DTC has been mentioned as April 1, 2012 while the speech is silent on the effective date for GST. Whether these bills ultimately pass and get implemented on time are anyone's guess.The proposal for direct cash transfer of subsidy on kerosene, LPG and fertilisers is commendable but again subject to implementation issues.A lot of the budget speech is devoted to simplifying life for the honest tax payer and easing of procedures. There is talk of avoiding unnecessary litigation and of self declaration and reporting. The proof of the pudding ultimately will however be in eating it.Apart from things that have been announced, it is also important to consider the things that have been left out of the budget. The biggest omission in the budget speech is the question of high oil prices. In a scenario where Brent crude is hovering around $ 115/barrel and the oil marketing companies are not allowed to raise fuel prices, the question is, 'Where will the shortfall come from?' The finance minister had it easy last year since he was helped by windfall revenues from the 3G auctions and sizeable PSU disinvestments. With the equity markets not being very upbeat, it is questionable whether the ` 40,000 crore disinvestment target will be met in the coming year. In other words, the deficit projections may turn out to be optimistic. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
