Budget!!

 

 

I know, I know.. Why would a site on thoughts need a post on the Budget? Well firstly, it is important to understand the impact of government decisions on Mango-people, and secondly, I was making notes all through the budget day, so I’m not letting that go waste!  : )

Pranab Mukherjee is like Chunni babu from Devdas- non-committal, ever-smiling (with surprising seriousness), and trying to woo Paro (Fiscal Deficit) somehow. Well in this regard, common man should rightly be Devdas, because he’s been given money and fame, but ends up paying for much more. Confused?? Actually, me too.. So I’ll just cut to the chase.

Our FM, Mr.PM (Ironical!) closed his speech with the words, “This is an aam aadmi’s budget. I will not say much more, but leave everything to the people of India.” Truly, that is what has been done, on the surface at least.

Tax slabs are now changed.

New Income category	Old Category	Taxation	Savings (approx)
Upto 1.6L	Upto 1.5L	Nil	-
1.6 – 5L	1.5 – 3L	10%	Rs.20,600
5 - 8L	3 – 5L	20%	Rs.41,200
8L upwards	5L upwards	30%	Rs.52,000

 

What the new slabs do?

No technicalities, but the new slabs puts more spending power into the middle class’s hands. By expanding the slabs to accommodate higher avg. salaries in the previous slabs, FM is putting a considerable savings (for guaranteed expenses!). At the moment, it is one method to help the middle and lower income classes fight inflation.

 

The Good +/-

1. This year Fiscal Deficit (FD) was maintained at 6.8-6.9% (as promised in the previous budget), the coming year FD is targeted at 5.5% , further to 4.8 or lower for FY’11 (68%).

2. 25% allocation to rural infrastructure; about 25 km of highways each day.

3. Revenue tax gain Rs.20,500 Cr this year.

4. Service tax contributes 60% to the coffers, but service tax rates retained at 10% taking a hit on direct taxes. To counter this, he makes changes to indirect taxes, which is projected to put Rs.46,500 Cr in gains.

5. Agri delight-

• Farmer loan credit raised to 3.75 L.
• Banks for all villages with 2000 population.
• Support to retail trade in agricultural sector.
• 2% subsidy to farmer loans, extend farm loan payment by 6 months.

6. Partial cutback on stimulus to auto industry.

7. Big allocations –

• 31,000 Cr for education
• Social sector outlay is at 1.38 L Cr.
• Urban devpt allocation : 61,000 Cr
• UID gets 1900 Cr.
• Renewable energy outlook raised to 1000 Cr

8. Increasing health insurance for the poor by adding NREGA families.

 

 

The Bad +/-

1. VAT incr from 15 to 18% ; Excise duty up, so everything will cost more.

2. No numbers specified for RT Education act or Food security act, but general measures for Food security mentioned. No statement for higher education and not much for skill development.

3. IT will be hit, nearly 10,000 jobs this year affected as foreign companies are not getting the same tax benefits for companies as in other countries like Mexico,Brazil.

4. Too many sector based concessions, not so good in today’s context.

5. Net gain from indirect tax will be 46,500 Cr, but if that does not happen (due to market downtime, 3G auction not living up to expectations, FDI speed breakers) may make Fiscal target difficult.

6. Being a non-election year, he could have pushed more, but played safe with reforms.

 

 

The hopeful +/-

1. Setup a body for macro supervision of big companies

2. Setup a financial stability council to establish mechanism in case of financial turmoil.

3. Financial regulations are very old ; Legislative reforms commission(LRC) setup to improve this on a regular basis.

4. Govt. had been giving incentives to petroleum companies to supply fuel at subsidized rates, due to which a majority of them are in loss. International petrol prices are much lower now than before when they were more than 1000 dollars/barrel, so these companies can absorb the increase in the prices of petrol, diesel. Hopefully, they will come out of the loss stage eventually.

5. GST and direct tax code by April 2011.

6. Lots of incentives to NRIs for investment, return on Indian equities over past year has been around 87.4%. Hopefully, things will remain good over the coming year.

 

So, that ends my wrap up of Budget 2010. Till next time.. : )

< I got a little newsreader like vibe>

The art used above was painted by Vidita Jain, a class VII student of St.Thomas’ at Delhi. Ideally, this picture represents the change India needs (Sorry Obama) in the coming decade. Tackling global warming, peace, and sustained progress. Here’s to hoping we come close to making it happen. And kudos Vidita!