Union Budget and Its impact

Submitted by Suresh_Gopinathan on Fri, 2007-03-09 12:05. Other

Honorable Finance Minister has presented UPA’s third budget on 28th febryuary, 2007. Let us consider the situation in which he has presented the budget

GDP growth at 9.2%
Investment ration 33% of GDP
Inflation hovering 6% above
Agricultural growth declined
Overshooting the service vi-s vis manufacturing and agriculture
Overall buoyancy in direct and indirect tax collection and compliance
Forex Reserve more than US$180 Billion

Hues of industry

Reduce tax rates
Thrust should be given to SEZ
Inclusive growth

Pressure from Coalition partners

Not a cohesive group, formed in an opportunistic manner
Only a political adjustment than a policy adjusted coalition
No focus on macro economical aspects rather individual interests

The presentation of budget itself lack direction. The momentum of second generation reforms were set in the year 1991 by the present Hon PM Man Mohan Sigh, the momentum was followed by successive governments irrespective of their political differences. Globalization has its own pros and cons on the economy as a whole. Opening up of many sectors to foreign institutions has obviously benefited our government in many ways, but it has pitfall also.

Unlike in the previous budget the focus suddenly switched over to agriculture. This is an obvious change in the policy paradigm. While presenting the budget 2004 the Finance minister has made a statement in the Parliament that now we have come to state were our go downs are full of grain and the government is finding it difficult to procure and store the grains in a systematic manner. The production at that time was sufficient enough to feed the burgeoning population at that time. Therefore he advocated the farmers to turn to floriculture and horticultures. This statement is of wide significance since the BPL families are 26% of India’s total population. Now the hoodwink has come in to picture.

Now the focus su8ddently shifts to agriculture and social sectors. He could have reduced the tax rates since the collection and compliance are good and no impending election in the coming year or so. Invoking additional cess is retrograde step in the era of high inflation, as it would essentially hike the cost of all items and the dividend distribution tax as well. He could have given some boundy for at least the salaried people who are reeling under inflationary pressure and devoid of any other benefits other than 80C benefit, but that seems unheeded, meaning thereby making them milch cow over and again because of the known reason of their high level of tax compliance. The reduction or rationalization of excise duty is made only for few unnecessary things/ articles. Hike in duty of cement would definitely add up to inflation and overall increase in construction cost

Hike in the exemption level for service tax payees are a welcome measure. However obvious exclusion of certain class of professional from the net calls for a review.

Reduction in CST rate to 3% and inclination for a comprehensive GST in the year 2010 is a welcome, bold and step in right direction. The thrust given to infrastructure needs kudos to him.

Like any other budgets the budget 2007 also has good and bad sides. The severe pressure under which the FM made the budget also calls consideration. In the years to come we should give more impetus to agriculture and infrastructure. Indian economy is essentially and agriculture economy, unless she is able to mouth feed all her population there is no scope for any development. Our country has got many positives which overshoot negative thus having the potential to become a superpower in the year 2020 as envisioned by our great president APJ Abdul Kalam
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