Growth Oriented Budget

By now everybody would heard, read or made an opinion about this years Union Budget. In fact I wanted to post this on Friday night itself but as usual my laziness came in between me & my blog posting!!!

First thing which comes to my mind about this budget is "inclusive growth" concept which government is talking about from quite a few days. I think first time a Finance Minister of India coming out openly in budget speech & saying India needs to double digit growth to eradicate poverty, he is saying "nobody is going feed 120 crore people of India rather we have to feed ourselves & in excess we have to export". This vision itself is future growth oriented.

Now coming to budget details first eye catching point is Direct Taxes which is going to affect middle, higher middle class & upper class savings & expenditure pattern. The upper cap for first slab of direct tax (i.e. for 10% tax rate) raised from 3 to 5 lakh and 20% tax rate slab increased from 5 to 8 lakh. Here tax payers can save Rs. 20000 & Rs. 50000 per year with respect to 1st & 2nd slabs. This saving itself will lead to more consumption/investments & etc. And why I feel good about this is not because less tax payment but direct consumption/investment is far more effective than the government spending as we all know efficiency of bureaucracy! And in addition to that Mr. FM has extended Rs. 20000 from 1 lakh to 1.2 lakh tax deduction amount under 80c act Income tax for long term investments. Which again leads to more saings & investments. Why I stressing this savings part is because of this only India relatively less affected from this present Financial Crisis. Because if you see the roots of the crisis is US saving rate(less than 2% where as India's is 33-35%), their dependency on credit card life, kind of loans like NINJA (No Income, No Job & Asset) & some regulatory issues.

Now coming to corporate taxes, he kept base tax of 30% same but reduced surcharge from 10% to 7% & kept education cess same as 3%. Previously altogether it used to come around 33.99% but now 33.2175%. I don't find reducing surcharge is a good move particularly companies are getting back to their normal profit & bottom line targets. And I was watching Mr. Narayan Murthy, a well known Infosys Founder was saying that "there should not any tax holidays to IT companies as they are paying taxes in all over the world then why not in India". So I don't find any harm in his statement, as I believe tax holidays or anything like that is for starting up/building companies & not for well built companies. In accordance to Murthy's views Mr. FM has increased MAT (Minimum Alternative Tax, which is paid by tax holiday companies/sectors & etc) from present 15% to 18%.

Now coming to rural/agriculture in which still major part of India is living & getting livelihood. First in this NREGS which is quite a revolutionary in recent time by providing at least 100 days job in a year to villagers & particularly 75-80% of them are women with a wage of Rs. 90 to Rs. 100. NREGS got allocation of Rs. 40100 crores. This scheme brings many advantages mainly, women empowering financially, less crowding of urban areas for unskilled jobs, increase in income of village people. In fact one of the cause for present food inflation is strong demand from villagers as compared to villagers. Okay about inflation we can talk later. Mr. FM has kept the target of agriculture loan of Rs. 375000 crore for this financial target. Rs. 400 crore has been allocated to extend the green revolution to eastern parts of India like Bihar, UP, WB, Orissa & etc, due to which obviously productivity will increase. And most importantly Rs. 300 is provided to organise "60000 pulses & oil seed villages" to increase the productivity. Providing banking facility to places having more than 2000 population by 2012-13.

And most important thing from FDI & FII perspective is Fiscal Consolidation/Deficit. Financ Minister has given surprising target by beating the market expectation of pegging it to 4.8% for 2011-12 & 4.1% for 2012-13. Here government is expected raise some Rs. 35000-40000 crores from disinvestment process & substantial amount from 3G auction process.

Now most controversial but step towards the oil price deregulation is restoring the basic duty of 5% on crude petroleum; 7.5% on diesel and petrol and 10% on other refined products. Also, the central excise duty on petrol and diesel would go up by Re.1 per litre each. Almost all political parties including some parties UPA opposed & opposing this move but I dont know till when they expect government to give subsidy & run oil companies in loss?

Similarly substantial amount & concentration has other important sectors like infrastructure, power, environment & climate change, education, health & etc.

So overall I rate this budget as 8/10.