The perception among the economists and the industrialists has that the budget is a reasonably good one. The main challenge before the FM was to push for inclusive growth , while bringing down the current acccount deficit and the inflation..I am not sure how far the budget will help in achieving this, for there are lot of assumptions that the FM makes. But it definitely is a step in the right direction - laying out an excellent plan with long term benefits in mind. The main challenges may on the implementation side and may be the assumptions that the FM makes.
Positives-
1) Increased allocation for education - 52000 crore . 23% higher than before. This is a key area - because investing in education is important because we need skilled labour and only through these steps can we capitalize on India's demographic capital. This is a step with long term benefits in mind and is very good for the economy.
2) Direct Subsidies for the poor, thereby eliminating the incentives for a middle men. This is a big steps towards increasing the efficiency of subsidies. But a flipside that i hear is that - this will not be effective from April 1,2012 until we have the UID implemented.
3) MNREGA - allocation same at 40,000 crore. (same as previous year). This is good as the government is focusing on the effective implementation rather than increasing the allocation and the resulting money landing up in the pockets of corrupt beurocrats and middle-men.
4) Steps towards moving to GST and GTC.- which will simply and reform the tax system.
Negatives -
1)A Key issue that many economists point out is that there is nothing new in the budget . what he has put in the budget are things which are already being talked about.
2) No concrete steps to bring back the black money .
3) Tackling corruption - just forming a counsil of ministers. sufficient?.
4) No concrete plan on how the deficit will be brought down to 4.6%.
Neither positive nor negative(gray areas) -
1) Oil subsidies to be brought down - positive or negative?. I am confused on whether this is good or not?.
On one side it reduces the burden on the govermnent thereby helping to reduce the current account deficit.
But on the other side, this reduction implicitly implies that there will be a policy change on the government's part - either deregulate the diesel price and pass on the burden to the consumer. This may spiral inflation.
2) MAT tax going to harm the small software firms - There is a MAT tax ( though i am not sure what this means) being thrust upon on the SEZ. This will be passed on to the software companies. Though biggies such as Infosys will not be affected by this , this is going to affect the small companies. Nasscom Chief Som Mittal has come out in open against this.
3) Allowing FIIs to invest in Mutual Funds - Most economist see this a positive step. But FIIs are generally not considered as a stable investment. They can withdraw any time. FDIs are anyday better. But ofcourse, something is better than nothing!.
But the government had to something to reduce the current account deficit and this time it is the software services industry that has fallen on its radar.
A big issue is that there are no concreate plans on how the current account deficit is going to be brought down to 4.6% of the GDP. The tax exemption limits has been increased. The FM is assuming that more people will come forward and pay tax because of the growth. This looks a bit far fetched to me.
Positives-
1) Increased allocation for education - 52000 crore . 23% higher than before. This is a key area - because investing in education is important because we need skilled labour and only through these steps can we capitalize on India's demographic capital. This is a step with long term benefits in mind and is very good for the economy.
2) Direct Subsidies for the poor, thereby eliminating the incentives for a middle men. This is a big steps towards increasing the efficiency of subsidies. But a flipside that i hear is that - this will not be effective from April 1,2012 until we have the UID implemented.
3) MNREGA - allocation same at 40,000 crore. (same as previous year). This is good as the government is focusing on the effective implementation rather than increasing the allocation and the resulting money landing up in the pockets of corrupt beurocrats and middle-men.
4) Steps towards moving to GST and GTC.- which will simply and reform the tax system.
Negatives -
1)A Key issue that many economists point out is that there is nothing new in the budget . what he has put in the budget are things which are already being talked about.
2) No concrete steps to bring back the black money .
3) Tackling corruption - just forming a counsil of ministers. sufficient?.
4) No concrete plan on how the deficit will be brought down to 4.6%.
Neither positive nor negative(gray areas) -
1) Oil subsidies to be brought down - positive or negative?. I am confused on whether this is good or not?.
On one side it reduces the burden on the govermnent thereby helping to reduce the current account deficit.
But on the other side, this reduction implicitly implies that there will be a policy change on the government's part - either deregulate the diesel price and pass on the burden to the consumer. This may spiral inflation.
2) MAT tax going to harm the small software firms - There is a MAT tax ( though i am not sure what this means) being thrust upon on the SEZ. This will be passed on to the software companies. Though biggies such as Infosys will not be affected by this , this is going to affect the small companies. Nasscom Chief Som Mittal has come out in open against this.
3) Allowing FIIs to invest in Mutual Funds - Most economist see this a positive step. But FIIs are generally not considered as a stable investment. They can withdraw any time. FDIs are anyday better. But ofcourse, something is better than nothing!.
But the government had to something to reduce the current account deficit and this time it is the software services industry that has fallen on its radar.
A big issue is that there are no concreate plans on how the current account deficit is going to be brought down to 4.6% of the GDP. The tax exemption limits has been increased. The FM is assuming that more people will come forward and pay tax because of the growth. This looks a bit far fetched to me.
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