Friday, February 29, 2008

Budget Gab

In what could be P.C’ last for the next few years, he’s kept his Gab on the whole positive, sans the Rs.60, 000 Cr. Drubbing he’s given to his PSU Banks.

My favorites:

1. Hell with other tax chops – my favorite is the Rs. 50 Crore grant for the Tiger Reserve force :) Yayy... these beauties deserve more.

2. Although I detest to imagining what our roads might look like, the excise duty cut on the Motor segment is welcome. Apart from a little boost to domestic consumption, I think it will give a good fillip to our export competitiveness.

3. We can breathe easy for the first Rs.1.5 Lacs… Ummm.. four thousand bucks..

4. Women power re-enforced with a cool tax break for the first Rs. 1.85 L

5. Removal of dividend distribution taxation b/w subsidiary and holding cos.

What he could have done:

1. Ease the FBT mess for companies by exemption a little more services

2. That he’s increased Short Term capital gains to 15%, he very well could have increased the 80-C investment options to Rs.150,000

3. Rs.44 Crores ain’t enough to attract talent to our defense forces. He ought to have increased marketing for recruitment on this sphere. I hope the next pay commission does more for the defense forces.

4. While a lot of investments been promised for Agriculture he should have encouraged lending for Modernization of Agri. India’s agri productivity has been diminishing over the years and apart from power and fertilizer subsidies, more needs to be done on the mechanization front. I am on purpose not commenting on the whopping Rs.60, 000 farmer write off’s due to want of enough facts on the social .

5. Excise on Tobacco’s and liquor ought to have been increased

Lost his mind:

1. Excuse me for sounding blasphemous but Rs.1,000 for modernization of Madarsa’s ? I remember my colleague Chinmayee quoting a bureaucrat from Assam making this demand and I laughed it off. If only I knew what was coming.

2. Infrastructure’s been feeding a huge part of our 9 % growth rates. Nothing for them? The IT and ITeS is in a large way responsible for where we are today. No reference to any breaks for them? While P.C’s been very benevolent with Auto and FMCG this lack of apathy … especially for Infra beats me.


dharma said...

Loan waiver for all small and marginal farmers....what about these loans..they have to be written off..these constitute 4% of every PSU bank's balance in effect its an NPA at the time of lending what signal is he issuing to the farmers...u can keep borrowing at will but dont repay...fine its a populist measure prior to election year..atleast what were the measures he's planning as a part of fiscal prudence to prevent such write offs in future.. its the tax payers money at the end of the day..hes setting a bad precedent for future finance ministers to write off such loans at will. In effect an indian sub prime i would say!!

Chandrasekar said...

Good analysis Baidik. Yes u are right PC missed out on FBT which is like really a pain now.
Also waiving of 60000 cr.
Then why do you give loan in the first place? Instead he can use that for rehabilitating them as Self help groups. Arey whose money is it? its the taxpayers money. instead of waiving them, PC could have provided crop insurance and crop marketing mechanisms for farmers so that they can be a self sustaining unit. Also i agree with u mechanisation of agriculture and educating farmers on loans etc will go a long way in improving their morale. India is primarily an agrarian economy and we need fertile lands and farmers to till it and produce food for the burgeoning population and industry.
The SEZ's must not be constructed on fertile land.I am happy he has done something for the soil testing and stuff.For god's sake,
he should stop farmer suicides in future otherwise we will not have enough food to feed our hungry countrymen.
waiving crores of debt and granting of subsidies will have a negative impact on RRB's as well as banks like NABARD because they will be a liquidity crisis for them and soon they will start reporting NPA's. This will inturn reduce granting of further loans and due to shortage of funds, the govt will ultimately try to recover it through increased petrol prices or gold prices or essential commodity prices or direct or indirect tax rates. All this is having a chain impact.
Either way everything is linked and has a cascading effect.
And modernising madarsas - what???
is he trying to appease the minority by doing this.Typical vote bank politics. Why does he not bother about modernising hundreds of temples that are awaiting renovation or reconstruction. This is absolute bullshit!!! Pardon me for my language but this is incorrigible.

Siddharth said...

That was some good analysis da.

PC was in his elements today.

We did expect the tax slab re-adjustments coming (due to election year), but as you pointed out--I was expecting an increment in 80C levels between 120k-150k.

In review, a very pro-agro and pro-education budget--not much in it for corporates. I wonder why PM called it a "Pro-Investment" budget!

I think, as Dharma pointed out, UPA knows that their chances are slim with regard winning to elections--so they're going lock, stock and barrel to please the "aam aadmi"... and in the process ruining it for the next FM.

The Madrasas bit was ridiculous on his part. What was he thinking?!

The Tiger Reserve allocation was something which may be too little too late in my view. It requires a PM to go into the forest reserve to realize that tigers are missing (?!?!) surely these magnificient creatures deserve more (which should've been prompt in the first place).

LAKSHMI said...

Amidst all the hard core negativists and staunch critics, just thought I'd start off with a good note..Mastermind P.C has indeed engineered a 'inflation control' budget with his attempt to increase disposable income and supply of goods into the economy.. thanks to reduction of direct and indirect taxes and his giant leap of the agri-loan waiver..while the economies of the US and UK are en-route recession, it indeed was a thought out move for the F.M to make an approximate 9% growth rate projection despite his conservative revenue projections and padded expenditure numbers to expose a likely rosy picture for the UPA government in the year to come!!!
But Mr.F.M.. I gusess I too would join the criticising party with my set of questions....and here I go..
1) On the economic front
Without a matched infrastructural upswing (which is virtually impossible, thanks to the parched allocation made towards it in this budget), how is this growth going to be substantiated or sustained??? Do you expect to endorse the divestment approach to infrastructral development too.. and thus expect that the private sector would pool into the infrastructral sorry to say this, but I really dont think that unless the Government sets a classi expample towards the improvising infrastructure equitably all across, the private sector would be unable to help the situation!!!

2) On the financial front
a) I am deeply concerned about the eye-wash tall claim of loan waiver that you are boasting about.. if i understand right, the total 60K crore has not yet accounted in your list of expenditure as yet..and still your 9% GDP claim continues to shine high!!!!!! Anyway, please tell me.. how much of assurance can i get that this amount would actually benefit the small and marginal farmers and not the intermediaries and money lenders?? And well may I please know, how you can plan for substantial disbursements to be made be made by the successive governments?? At the end of the day, the destiny of the loan waiver, as I see it, is going to be huuuuuuugggggeee losses to none other than banks!!!!!!!!

b) Impact on the software industry
-> In your attempt to thrust on agricutlutral growth, Sir, you have very conveniently overlooked a crucial contributing factor to the zooming GDP rate that you are so boasting of.. the software industry.. infact you have tried your best to introduce a reverse curve into the industry.. increasing the excise duty on packaged software, adding whatever little was left over under the software industry and telecom services into the service tax net and last but not least, not providing any additional incentivising provisions to promote development in the sector!!!!

c) Impact on the stock markets:
-> While the calculated attempt of the FM to stabilise the stock markets is worth apprciation, unfortunately, FIIs who own a liberal chunk of the stock market volumes would really not be affected by the increase in STCG to 15%.. thanks to their stand of booking the possible short term gains under the head of Business income.. which invariably boils down to the brunt of the increase STCG levy to rest on the retail and short term investors.. but why burn the burnt???
-> The introduction of CTT and the inclusion of almost the entire gamut of stock exchange services under the Service tax net is indeed going to cause quite a bit of resistance.. but sir i really dont think that would be much of a botheration to you .. after all, your inherent trait of making hay while the sun shines too has to shine in what ever you do...!!!

Lots of questions more.. but I guess, if you would be able to give me a reasonable expectation to what I've just asked you... most of my concerns would be addressed!!!!

Vibhash Prakash Awasthi said...

1000 cr. for madarsas were must...aftrall its election year.