Sunday, July 5, 2009

Pre Budget Blues

Well. the Union Budget is just a few hours away and the blues have already started setting in. Maybe there is a plethora of expectations that is causing unnecessary fluctuations in the anxiety. Here’s my budget wish list.

  • The Direct Tax rate should be left untouched and the tax exemption limit under section 80c should be increased.

This would put more money in the pockets of people and thus spending would increase. This would also lead to an increase in demand that would indirectly start reviving certain sectors such as FMCG. I do not foresee a tremendous rise in the demand for housing merely on the basis of increase in exemption.

  • Indirect Taxes such as FBT should be removed completely and taxes such as STT should be reduced.

I say FBT should be removed is because this forms quite a substantial chunk of the income of middle class in the private sector. Quite an important part of the salary these days is constituted by FBT and hence should be removed. This would again help revive demand. I still say STT should not be removed completely is because the profits made through markets earn enough to justify at least some tax. I agree that this might affect the volume of transactions but given that the profits that is earned, a lower STT would do a world of good. Goods and Service Tax should be introduced as soon as possible to reduce the existing complexity in the tax structure and to ensure proper and smoother tax implementation.

  • Increased spending in Infrastructure and Transport

The percentage of GDP spent on these sectors should be increased substantially. This would be one of the main driving factors of the economy in the years to come. There are existing projects such as The Golden Quad project that needs to be accelerated. Every km of road built in rural areas brings with it increased accessibility, shorter routes, shorter routes, better employment and new investments.

  • No Increase in existing public spending plans other than increase in the Rural, Health and Education sector.

These are the main drivers of a demographically rich country such as ours. We need to have better density of well equipped hospitals and capable doctors. We also need to have more institutions of higher and quality educations and should encourage good foreign universities to set up international campuses in India. This would help prevent brain drain.

  • Increased spending in Defense as perceived appropriate.

There should be increase in spending in this sector on a need basis. The emphasis should be primarily on indigenous development and research.

  • Ways to earn revenues and cut deficits

This is the major concern plaguing the economy currently. To plug this gap, I believe rather than increasing the cess or other taxes, the leaks in the system should be plugged. All the benefits do not trickle down the the needy in public programmes such as NREGA and others. If everyone at every stage is held accountable to whatever he or she does and if it is ensured that benefits are made available to the needy then these programmes shall be much more effective and this shall showing up as improvements in the other sectors of the economy. This albeit an indirect way to plug the double digit deficit, is much more efficient than raising any of the direct or indirect taxes.

Waiting for the Bday tomorrow !!