Missing the big picture
I am a bit disappointed by this budget. I had expected more from Finance Minister P Chidambaram (PC). This seems to be more of a compromise budget rather than one with a “big picture” strategy that one would have expected from him. I was expecting him to bat like Tendulkar. He turned out to be a Chopra !
- Thrust on infrastructure specifically airports, ports & tourism.
- Thrust on agro-processing industry. Now Sharad Pawar needs to follow up
- Removal of long term capital gains tax and reduction in short term capital gains tax to 10%. Movement towards turnover tax
- Increase in sectoral caps for FDI in telecom, insurance & civil aviation. Promise to increase FII caps too
- Bank securitization act to be improved (at least that it is the impression I got from PC’s words)
- VAT to be implemented by 2005
- Boost to the domestic IT industry – Computers exempt from excise
- Tractors population to grow and automotive R&D to be given a 150% tax exemption
- Shipping industry to move to tonnage tax
- Investment commission set up. Hopefully a change in mindset from “approving investment” to attracting investment. It will be best if the bureaucracy is kept away from running this outfit.
- Some widening of the tax net specifically in the services sector
- Increased spending on agriculture, rural infrastructure, water management etc. Instead of doling out freebies, the focus is rightly on building infrastructure.
- However the big question however is whether this well intentioned measure will actually lead to benefits at the grass roots – remember the famous 85 paise loss example. The same thing applies for the education cess. Increasing education spending is definitely a noble thing but the problem is will this percolate down into helping the expected beneficiaries
- No populist measures on the small savings front maintained at 8%
- No measure to widen tax base for individuals eg agriculture
- Increase in defence expenditure by 17 % – I feel that defence though important should come down the priority list.
- Sops like the Bihar package (even as
LalooLalu was dozing off while the Finance Minister was delivering his budget speech), ITI institutes upgradation could have been avoided
- No concrete steps to cut subsidies. He has postponed the hard decisions to a later day by asking NIPF to come up with a recommendation paper
- 2% cess on all taxes plus increase in service tax from 8 to 10%
- Too much micro-management at the indirect tax (excise duty) level. Too many exemptions/special cases.
- No implementation of the famous Kelkar report on taxation
- Increase in steel excise duties from 8% to 12%
- Pressure on banks to continue rural lending – danger of NPA’s building up
Disclaimer: Sameer is both a venture capitalist and an eternal optimist. These views are his own.
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The AnarCapLib cabal is compiling opinions on the Budget