On the day of union budget, NDTV profit decided to write on the budget briefcase. Probably it knew beforehand that there is nothing substantial inside, so let us concentrate on the outer “beauty”. To ensure that you do not go searching for the other article, let me tell you that it is just a tradition of the British era – their briefcase is being passed on from years and we sport different briefcases!
And on the other hand, Indian Finance Minister Pranab Mukherjee said that there is a need to accelerate the pace of reforms but has not announced any himself. Has it left the task to us? For one, the budget is much delayed and then to top it, it is over with a small whimper!
Prima facie, to sum it all, the government is going to take money from us. They need that to trim down the subsidy burden. Owing to high oil prices, India’s subsidy burden stands at roughly 2.5% of the GDP and Mukherjee called for reducing that to less than 2% in the coming fiscal year. Let me know if I am thinking like a stupid and that too, very loud, but is the government going to fund the railways and the airlines (read Kingfisher and Indian) with the money that it collects when I dine out?
Also, since we raised just Rs139 billion in the current fiscal year from stake sales, far below its budget target of 400 billion rupees, we are going to sell Rs 300 billion rupees worth of stakes in state companies in the next fiscal year. Again, the government is going to fill its pockets. Okay, how much percentage of it goes towards the flight tickets of Sonia Gandhi who goes to some secret place to get rid of some undisclosed disease?
I somehow feel as if it was Dinesh Trivedi’s railway fare hike that acted as the spoiler and therefore Mukherjee did not announce all what he wanted to. Or may be as I said, I am thinking out a bit too aloud! However, we do not know how but our economy will grow at the rate of 7.4% next fiscal year. So basically, the government is planning for 2014 when the general elections will take place. It needs to announce by 2014 that see dude, we took away all your money, but the country’s fiscal deficit is under control. We need some brainstorming here is actually this fiscal deficit is that big an issue for a growing economy like India.
And yes, phone bills will rise, eating out will become more expensive, yes the local restaurant chap will charge even more on the MRP of a water bottle and travel will also become expensive. I just hope we do not return to the Hindu rate of inflation with the new tax rates!
What is disappointing is, this was the most awaited budget since 1991 when Manmohan Singh announced the land mark and first ever reformist budget of India. Twenty years down the line, we have just missed the opportunity to probably create history, or may be much more than that.
- Fiscal deficit seen at 5.9% of GDP in 2011-12, expected to be 5.1 % of GDP in 2012-13
- Net market borrowing seen at 4.8 trillion rupees in 2012-13
- Plan expenditure budgeted at 521.25 billion rupees in 2012/13, up 18 %
- To keep 2012/13 subsidies under 2 % of GDP
- To inject 159 billion rupees to capitalize state-run banks in 2012/13
- Gross tax receipts seen at 10.8 trillion rupees in 2012-13
- Proposes to levy tax on all services except 17 items in the negative list from 2012/13. Proposes to raise service tax rate to 12 % from 10 %
- No change in corporate tax rates
- To enhance tax exemption limit to 200,000 rupees for individuals income in 2012/13
- Proposes to provide full exemption on import duty of thermal coal for power plants
- Proposes to double basic customs duty on gold
- Expect headline inflation to moderate in next few months and remain stable thereafter
- Economy expected to grow at 7.6 % in 2012/13
- Allow external commercial borrowing of up to $1 bln to raise working capital for airlines industry for 1 year
- To allow qualified foreign investors in Indian corporate debt markets
- To allow external commercial borrowing to part finance rupee debt in power projects
- To remove sector-specific restriction on venture capital fund investments
- Hope to achieve “broad-based consensus” to open multi-sector to foreign investors
- Allocates 1.94 trillion rupees for defence in 2012/13, up 18 %
- To award contracts to build 8,800 km of roads in 2012/13
- Government doubles allocation for tax-free bonds to 600 billion rupees for financing infrastructure projects in 2012/13
- Disinvestment target in 2012-13 of 300 billion rupees
- Expects country to become self-sufficient in urea production in five years
- Current account deficit seen at 3.6 % of GDP in 2011/12, to be reduced in 2012/13