Budget 2013: Three things FM must look into before presenting budget

Finance Minister will be busy in finalising the Union Budget’2013 to be presented on 28th February’2013. There are really many challenges before him to address and present a budget which will boost economic growth of the country. The GDP growth for the year end 2013 is likely to be around 5.5 percent and all eyes are on union budget. Not only we Indians but the world is also looking very closely to the developments in India as this budget will decide the future course investment in the economy of the country. Fiscal deficit and current account deficit are the major concerns at present and overcoming people’s expectations is a big challenge for the finance minister. Corporate world are also looking positively that this budget will be pro growth and not a populist budget looking general election in one year’s time.

Recently Government has also taken many steps to contain the deficit including hike in diesel price and CNG prices. Now the diesel price is partly decontrolled and diesel price is likely to be increased by 45 to 50 paisa every month. The Government also collected a sum 12,000 crores by disinvestment of NTPC shares recently. But the measures are not sufficed but want more doses from Government to speed up the economic growth. Rupee has appreciated recently against dollar but the crude oil price on the other hand is near to USD 95 per barrel. In this scenario containing deficit will be a major challenge for the government. RBI has also taken cautious approach and has reduced repo rate by 0.25 percent only.

Increasing service tax and excise duty will lead to dissatisfaction across the class and may back fire Government. In my view Finance Minister look into the following areas which can really help in increasing revenue and as well as reducing the deficit.

1) Focus on Wealth Tax :
The wealth tax act is totally ignored in India and we have hardly seen any action based on wealth tax evasion. There is news in the media that Finance Minister is considering the inheritance tax as an option to increase the revenue but I think if wealth tax is reviewed totally and actions are taken seriously then this can help a lot in increasing the revenue. The basic limit of wealth tax exemption is 30 lakhs at present for Individuals and needless to say lakhs of people will be having bank fixed deposit or postal deposit more than 30 lakhs in India. Less than 3 crores people file their Income Tax Return and I don’t think even 1 percent of this people will be filing their wealth tax returns. Revenue collection has to come from rich and ultra rich peoples and not from the poor and middle class family. I request Finance Minister to make a new wealth tax law like done in income tax by making Direct Tax Code.

2) Promote Gold Deposit Scheme:
We are the largest importer of gold across globe and this disturbs our balance of payment situation. Government is keen to reduce the import of gold to overcome balance of payment crisis. Government has month back increased import duty on gold from 4 percent to 6 percent. RBI recently also allowed mutual fund Gold ETFs to invest part of the fund in gold deposit scheme. Gold deposit scheme is one of the best avenues to invest in gold for HNIs and is the only gold investment which pays interest to depositor. I think Government has to aggressively promote gold deposit scheme and banks are to be given targets to achieve the same. No bank talks about the scheme and are not taking any step to promote gold deposit scheme. We all know a religious charitable trust are having huge quantity of physical gold and is not used for years. If the scheme is promoted and advertised aggressively then things may change in coming years.

3) Reduce Expenses:
It is difficult for Government to reduce the subsidy burden over night as it has many political implications and no party can take a risk when you have general election within one year’s time. It is high time that Finance Minister must reduce the unwanted expenditure of the Government to reduce the deficit. Government should also make aggressive disinvestment plan next year to reduce the interest burden.

Increasing tax every time will not solve the problem. You have to search for other areas either to increase the revenue or to reduce the expenditure. I hope Finance Minister will take this in to account while presenting his budget and not load more taxes on poor and middle class family.

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