Govt Wants Domestic Consumption Intact

In coming budget Mr. F.M. is planning increase the deductible amount under 80 C from 1 lakh to 1.5 lakh.

As you all know Indian growth story is mainly affected by export segment and its dependent manufacturing sector. For which government cant do much on increasing the international demand! And if you compare the urban areas consumption pattern has decreased due to job losses/unsecured future/salary cuts with rural areas. This financial crisis which is originated in US spread all over has not much affected the rural consumption pattern.

Now government is planning to increase the amount of long term investment and tax slabs. From both these moves, there are both advantages and disadvantgaes which can affect the country's economy. First if you look at the country's fiscal deficit which is standing at around 3 lakh crores which is 6% of total GDP may widen because of these moves due to exchquer to to tax government is collecting from these routes. And at the same time government must be consider the possibility another speculative bubble in various sectors like stock market, real estate and etc due to excessive pumping of the money. And the question of Inflation particularly CPI!!!

Now coming to advantages as I said domestic consumption will be intact, infact increase. From increase in 80 C tax deductible amount government is pushing for long term investment. Which amount in turn can be used for various development activities like infrastructures, government schemes like NREGS & etc. And one more basic fundamental reason for this crisis is US is "SPENDING ECONOMY NOT SAVING ECONOMY". And from this move governmet wants stress on the savings also!

And if government goes for tax slab increase then that is obviously lead to more consuption in an economy which is very good in present condition. So lets see!!!