JOIN USFinance minister Pranab Mukherjee’s Union Budget for 2011-12 has turned out to be an exercise in timidity as it has no major initiative or announcement to catch the imagination of the people and the industry. He has not imposed any new taxes, except bringing in some new services under the service tax net and kept the tax rates unchanged for most products.
He has also not offered any major concessions to any sector. The tax exemption limit for general category individual tax payers has been marginally increased from Rs 1.60 lakh to Rs 1.80 lakh, which will hardly mean anything when adjusted to inflation. One welcome feature of this budget is that the long-suffering retirees have been offered some relief as the qualifying age for tax exemption has been reduced from 65 years to 60 years and the exemption limit raised to Rs 2.5 lakh.
Yet, without major changes in rates the government is hoping to achieve a 19 per cent growth in total tax receipts at Rs 9,32,440 crore in 2011-12. The overall fiscal deficit is expected to be lower at 4.6 per cent of the GDP in 2011-12 as against 5.1 per cent now.
How did the finance minister manage this? He is mostly depending on a very robust growth of the economy as the GDP growth is expected to be 9 per cent in 2011-12 against 8.6 per cent in the current financial year. As a result, the government is expecting a sharp increase in income from various sources like, excise duty, customs duty, corporation tax, etc. In fact, the budget expects total gross receipt to go up by 18.50 per cent.
There was a strong case for replacing ad valorem duties with specified duties on petroleum products so that the consumer doesn’t have to pay every time crude oil price rises, but the finance minister failed to introduce the reform. The proposal to bring private health care under service tax and hike service tax on air travel and hospitality industry is bound to be unpopular as a large number of people will be affected by these measures.
Though there is no mention in the budget of the controversial proposals to increase FDI in life insurance and in retail trade, it could still find its way at a later stage considering the various lobbies at work. The proposal for direct cash transfer of subsidies on kerosene, LPG and fertilisers to the beneficiaries is a welcome move as, if achieved, it will contribute significantly to curbing the misuse of subsidies.