Budget 2009-10: Past perfect, future tense
10:31 PM Posted by ukmad
Budget 2009-10: Past perfect, future tense
Source: http://anilgarag.blogspot.com/
If there can be a perfect example for a damp squib, this is it!
Now let see some of the important budget provisions and find out what they mean for you, the financial markets and me.
1. India Infrastructure Finance Corporation Limited (IIFCL) has been granted flexibility in raising finances and lending to infrastructure projects, meaning that it has been left to fend for itself.
2. The allocation for NHAI has been increased by 23%. Good move this would help in the development of national highways.
3. Farmers, the darlings of the politicians (that's not because they are voters but because most of the parliamentarians and politicians are farmers themselves!) have been offered an interest subvention @ 7% and a 1% subsidy for prompt payment (this means the effective borrowing rate farmers is 6% and they are not required to pay income tax too). It pays to be a farmer in India.
4. The Market development assistance for exporters in the form of interest subvention on pre-shipment credit extended up to 31 March 2010. Our finance ministry expects the global crisis to blow over by then and then we will be charging the same interest rate for our exporters as other manufacturers.
5. SARAL-2 will be introduced this year. Have you ever heard of a simplified simple tax form? Here it is!
6. NREGA the wonder child of Congress (How come the name does not start with Nehru-Gandhi name?) has been allocated Rs.39100 crores (Rs. 391,000,000,000) this year. Lets do a small analysis. NREGA guarantees 100 days of gainful employment for one individual in every household in rural areas and pays Rs. 100 per day per head. This amounts to wages of Rs. 10000 per household for a year. So if Rs.391 billion have to be spent then this money is expected to cater to 39.1 million households, out of approx 197 million households as per the official census of 2001. The corollary of this is that 20% of our population is in abject poverty and is not capable of raising Rs.10000 per household in rural areas. If this is true then Shame on us. If this is not true then, there seems to be a problem with the way our government works.
7. A national mission on women's literacy is being set up and it will help in reducing illiteracy amongst women in the next three years. WOW a commendable job.
8. Students who take loans for education will enjoy a moratorium on interest payments until they finish their course. That is a great thing and it will go a long way in helping poor students to educate themselves.
9. A public Private Partnership is being envisaged in managing the good old employment exchange. That is a great idea, all you private placement consultants and naukri.com had better watch out big brother has just entered the fray and he will gobble you up.
10. The Unique Identity Number project has been allotted Rs. 1.2 billion to start its operations. That will kick start the operations but we need more money to count the number of people in this country and provide smart cards for each of them.
11. GROSS FISCAL DEFICIT is expected to be 6.8% of GDP and the Gross State Domestic Product limit has been raised to 4%. Mr. Finance Minister Sir, your targeted Fiscal deficit was 3% and you went on to stretch it to 6.8%. How can you expect your counterparts in the State Governments who take pride in profligacy to contain themselves to 4%?
12. Direct Taxes: Rs.10000 has raised Individual Income tax slab at the lowest level for male individuals and women. The lowest slab for senior citizens has been raised to Rs. 240,000, a raise of Rs. 15,000. For the HNIs, the surcharge of 10% is abolished. Here the people in the middle tax bracket seem to have the wrong end of the stick.
13. Fringe Benefit Tax has been abolished. Now your company will allow you to go on tour, spend money, and not worry about paying FBT on part of the amount you spent on that junket.
14. Commodities Transaction Tax is abolished. I do not know what to say. the government keeps banning commodities trading whenever it sees a flare-up in commodities prices. Therefore, the right question would be which commodity is being allowed to trade right now to understand the impact of abolishing CTT. Any way removing CTT will help commodity exchanges and help stock brokers to start commodity terminals as a hedge against the failing fortunes in the stock broking industry.
15. Minimum Alternative Tax: the MAT under which the previous finance minister has swept corporate growth under has just got bigger. MAT has been increased to 15%. There is no incentive for tax management using the growth=depreciation route now. THE SINGLE LARGEST REASON FOR THE STOCK MARKETS TO REACT THE WAY THEY DID IN RESPONSE TO THE BUDGET.
16. Thankfully there have been no major changes in indirect taxes.
17. GST to be operational from 1 April 2010. Good move. GST to be bifurcated to central GST and State GST. BAD MOVE. This means we are going back to the good old days when we had central sales tax and state sales tax. So in Karnataka instead of CST and KST we will have CGST and KGST. (How to share the spoils of the tax revenue amongst the centre and the state could have been kept in wraps and a common GST would have been better)
That is about it. As far as disinvestments is concerned, no specific announcement was made.
Moral of the story: More the things change more they remain the same. The 1991 wave of reforms was not of Congress manufacturing, but out of compulsion of the IMF. Now that the economy is strong enough to withstand the perils of global financial meltdown we can do it our way, the NEHRUVIAN WAY. In fact, at one time the Finance Minister was singing paeans to Mrs. Indira Gandhi, for having the grand vision of financial crisis 40 years back and resorting to nationalization of banks.
WOW I am very happy that we had such visionary leaders who could predict turmoil’s four decades ahead. Our FM needs to read a little of modern economics and find out that this financial crisis happened to US because the Glass Steagall Act was repealed in 1999. There was no way how our Prime Minister could envision that this would happen in 1979.
Now for the markets, the immediate support for the markets is 3800 on the NIFTY. Nifty has to fill the gap it created on that euphoric morning after the budget first. Then lets see if a plunge protection team is formed and whether it works, else we will see the October 2008 bottoms again.
Common man budget
10:59 AM Posted by ukmad
It looks like P Chidambaram and Co is very much inspired by the “RobinHood” story. This year Government has a record tax collection even surpassing the budgeted estimates. The excess tax collection has totally been diverted to Farm Loan waiver of Rs. 60000 cr.
I don’t think farmers suicide rate will go down with this wavier. The same farmer will apply for fresh loan next year.
Exemption Limit.
Finance minister has taken a bold decision of increasing the tax emption limit and reducing the tax rates. I think this tax rate structure will prevail for the next 3 to 4 years. Individuals will have more money in their hand to spend or invest. But this tax cut may not be a good news for IT employees. The struggling sector due to US recession and Dollar will cut the salaries of the employees to the extent of benefit they get from this tax savings.
Education:
The increased allocation to Education sector is welcome. The strength of India is its
young generation. 50% of Indians are below 30 age. Education is of prime importance for nation building.
Increase in Short Term Capital Gain:
With the increase in Short Term capital gain on shares by 5% Investors may hold their shares for Mid Term to Long Term. But we may see a reduction in daily turnover in stock market which is not a good sign.
Corporate to Gain Nothing:
This years record tax collection is largely contributed by corporate sector. There are no reductions in FBT and corporate taxes in this budget. The reduction in Excise duty will be passed on to consumers.
In all it is a common man budget. Due to the American pressure on Nuclear Deal , if the deal go through we may see a early elections. With this budget it looks like Government is getting ready for early election.
Chetan.Chougule B.COM A.C.A
KEEPING A SECTION OF POPULATION HAPPY AT WHOSE COST
1:03 PM Posted by ukmad
The union budget was presented by Mr.Chidambaram today. The views of various Charetred accountants and Stock market investors of Belgaum is here below:Mr.Nitin Nimbalkar (Investor)
KEEPING A SECTION OF POPULATION HAPPY AT WHOSE COST
The finance minister rose to the occasion and delivered a budget, which vowed a large section of the society with the intention of nothing, more than a vote.
The minister was more of a politician today rather that a economist.
The same thing happened today sincere and faithful farmers had to sacrifice and the one who were not that sincere got the benefit. I don’t say that all the farmers who don’t pay are not sincere but 75% of the farmers are capable of paying back.
This is giving a very wrong signal to the sincere farmers, friends be rest assured that the government will have to shell out a lot more in years to come because of the mindset of the farmers.
By increasing the exemption limit the minister has helped the Income tax department of the hardship of handling unwanted stationery.
By reducing the Bank transaction tax the minister has reduced the complexity in cash dealings, this will definitely bring in more liquidity in day today Bussiness.
Regarding customs and excise he did good job by neutralizing what he shelled out in the individual tax collections.
Because of depreciating dollar he did not reduce the peak customs duty.
Service tax limit hike will help a lot of people.
All in all I feel that the finance minister has intelligently used the surplus of tax collections of last year to give away the sops to the individuals be it a farmer , a businessman or a salaried employee.
He has clearly ignored the near future in trying to buy out the votes.
Because friends if next year if Mr. Chidambaram rises to present the budget (if UPA Govt returns to power) Be rest assured that it will be a completely different Ride.
So friends enjoy the year 2008-2009 this might be a peace before a storm…. so enjoy……..
Mr.Nitin Nimbalkar is my blog Financial Editor.
