Friday, March 16, 2012

Credibility is key!

It is a lackluster budget but is being perceived as one that hinges on credibility, pragmatism and reality.  Given the political, economic and global environment, an aggressive budget would have been a non starter.  

Highlights of union budget:
  • No change in corporate tax structure, however the indirect taxes, both excise and service tax have been moved up to 12% from 10%. Also service tax now covers a wider spectrum.  These two have been aligned as a preparatory step towards GST. 
  • Very modest change in personal income tax where exemption limit has been moved up to 2 lac from existing 1.8 lac and highest income tax rate made applicable for income above 10 lacs
  • Agriculture, power, civil aviation and infrastructure sectors have received attention. Proposed measures are ECBs for working capital and to replace rupee debt, reduction in withholding tax on ECB and tax free infrastructure bond has been doubled and part of it would be allocated to (Venture capital) to MSMEs through SIDBI
  • Large cars duty raised raised from 22% to 27%
  • Government borrowing program is aggressive; with no clear cut direction on fiscal consolidation, interest rate easing would be slow paced, cost of fund and liquidity would be under pressure
  • Import duty on refined gold has been doubled - this is a good move as investment could now move to more productive avenues and would also help current account deficit considering our gold import is substantial
  • Fiscal deficit is pegged at 5.1% for FY 2012-13 which is lower than where we are likely to end this year (5.9%) but higher than what was projected for the current year (4.6%) in last budget
  • GDP for FY 2012-13 is estimated at 7.6%
  • There is no direction or timeline on FDI, deregulation on diesel, GST or DTC

It is a credibility building exercise after Government has floundered about in its projections (growth and fiscal deficit) for the current year, recent election results, not-so-cooperative coalition and other challenges.

 It is a realistic budget, all right.  Let us hope our Government delivers in line with it's proposal if not more! 

No comments:

Post a Comment