Expectations from the Union Budget 2012-2013 are quite high as this is the last opportunity for the UPA government to present an effective and efficient budget which has a focus on growth for FY 2012-2013. But will it do it? Or again will it be a populist budget with an eye on vote bank as UPA is at back foot after the debacle of congress party in recent state elections? Well as a salaried person, businessman, investor, trader or an aam aadmi we do have our expectations from the Union Budget 2012-2013 – after all its India’s budget!!
It seems that the UPA government might plan to present a budget that would contain a series of relief for manufacturers and the salaried class. Union budget 2012-2013 will also address issues of the economically deprived class, offering social security coverage. The Finance Minister might manage the funds for flagship programs that are part of UPA chief Sonia Gandhi’s social commitments.
Well a close analysis throws certain important pointers:-
1. It is expected that the exempted income tax limit for the male salaried class will be raised from Rs. 1,80,000 to Rs. 2,50,000 which will definitely benefit the lower income salaried class. A direct jump from Rs. 1,80,000 to Rs. 3,00,000 will be a surprise and is unlikely!
2. The deductions under section 80C may be revised to Rs. 1,50,000 from the existing limit of Rs. 1,00,000 to provide enhanced options of investment to individual tax payers.
3. The Rs. 20,000 per annum investment limit under Section 80C exclusively for investing in infrastructure funds, could also be raised to Rs. 50,000 per annum to boost retail investments in infrastructure funding.
4. Though the stock market will rejoice if STT or Securities Transaction Tax is abolished, it’s unlikely that will happen at all. STT is not on the top agenda list for the Finance Minister. Also, STT abolishment without re-calibrating the capital gains tax structure is not possible. So the Finance Minister will never like to confuse the capital market on this. Well, if it has to be abolished, it may be a part of the larger DTC package.
5. Finance Ministry may allow foreign investors to directly buy corporate bonds of the Indian companies. This step will definitely boost up the bond market in India.
6. Expect a clear road map for the disinvestment in government owned companies with specific target of raising money from this process.
7. Government may come out with some mechanism to check the prices of essential commodities by directing the Commerce, Steel, Agriculture, Fertilizer & Chemical and Railway ministries. Also, to control inflation, the ministry of petroleum and natural gas could be asked not to hike the prices of petroleum products in the near future.
8. In the most likely situation, expect the DTC (Direct Tax Code) to be implemented from April 1, 2013 onwards. However, there is a possibility of some provisions of the DTC finding their way into this Budget.
9. Don’t expect any statement on the GST (Goods and service tax) because any mention and road map might question the credibility of the government. The Finance Minister might shrug it off as a non budget exercise.
10. Keep an eye on proposed duty on diesel cars; excise duties on consumer goods like cigarettes, computers, mobiles which might negatively impact the decision making.
11. There is strong possibility of the reversal in the interest rate cycle which will improve the market sentiments and cheer the bulls. This in turn could help the companies post healthier quarter numbers compared to last year. Overall a strong scenario!
In Union Budget 2012-2013, most importantly the Finance Minister’s priority will be to get set the growth momentum on track by targeting a growth target above 7.5% and maintaining a fiscal deficit below 5% of GDP without cutting costs and increase of tax burden. But this might again call in for ambitious targets which is not possible because:-
* It is difficult to manage costs without cutting subsidies to food, fuel and fertilizers.
* It is impossible to manage higher revenues without tax hikes.
* It is unconvincing to have aggressive disinvestments to bridge fiscal gap after the ONGC stake sale fiasco.
* It is hard to see the investments coming in for cash starved core sectors.
So, it is clear that there will be a sacrifice on fiscal consolidation. According to Dr. Montek Singh Ahluwalia, the Finance Ministry is planning to introduce fiscal consolidation in the forthcoming Union Budget 2012-2013. It’s a strategy which is targeted to lowering the shortfalls of the government and piling up of debt. Fiscal consolidation is one of the taxation and financial markers of the central government. It is constantly utilized to lower the fiscal shortfalls of the nation.
Now it’s your turn…..
Feel free to share your experience and thoughts in the comments area.
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