Sunday, March 4, 2007

Budget 07 - Not Good, Too Bad, And Seriously Ugly!

10 years ago, a guy named Palaniappan Chidambaram rose to present a budget. People hailed it as a "Dream Budget". Now the same guy presented another budget. Forget dreams, this is a budget that is disappointing, unimaginative and seriously sad. Everything was in place for the Finance Minister to present another dream, this time though he chose to present a nightmare for us. So what actually makes the nightmare budget so nightmarish?

Instead of trying to help the so-called "aam aadmi" by reducing the taxes, the minister chose to increase the government's expenses by Rs 100,000 crore!

  • Education came first with a whopping 34.5% increase. Now that sure is a welcome step, if you decide to overlook the fact that most of this will go into providing reservations and very little will actually help the education of the "general quota". (An article on reservations - Coming soon! ;-) ) The 2% education cess has been increased to 3% and many experts believe that this is NOT going to help education at all (Read article).
  • Next came the farm sector. A proposal for Rs 2,25,000 crore for farm credit and a target to bring 5 million more farmers under farm credit. Also a promise of 100 per cent subsidy to small farmers and 50 per cent subsidy to other farmers. Dear minister, when will you realize the fact that you are putting all that money into a black hole. Agriculture in India, in its present form is unviable. Farming on tiny individual plots is never a good idea (much less an efficient way of agriculture). The minister ought to have encouraged farm consolidation, but nothing of the sort happened.
  • Rural India dominated with hiked outlays under the Rajiv Gandhi Drinking Mission, the Bharat Nirmal Housing Programme, the National Rural Health Mission. Now our dear minister seems to have forgotten that people live in urban areas too. While the cost of health services in the urban areas has been rising, our minister chose to ignore the fact. With the infrastructure crumling in our urban areas, attention to urban infrastructure would not have hurt. While its good that our minister has tried to help the rural area, the complete lack of focus on urban areas is disappointing and unfortunate.
  • The budget proposes to include any sweat equity shares allotted by a company to its existing or former employees within the ambit of fringe benefits for the purpose of taxation. So with the ESOPs now under the FBT regime, employees stand to lose (I'll write more about it in my next article).
  • Of course, the finance minister did not forget to bring IT companies under MAT or the minimum alternative tax. India’s export-oriented enterprises such as in the thriving software outsourcing industry were brought back under the tax net. Now they have to pay 11.33 percent of the adjusted book profits as MAT.

Some questions that came to my mind while listening to the boring and unimaginative budget:

  • While I appreciate the focus on rural development, the fact is that people live in urban areas too, and they too need infrastructure. Btw, do you think the urban middle class is just about a hundred people or so? (the complete disregard of the urban middle class in your budget makes me think that someone told you so)
  • While IT too should be taxed like any other industry, don’t you think its too early?What in the world makes you think that 11.33% MAT would hardly make any difference to the IT companies?? Sir, it can push a lot of small companies (already with razor thin margins) into loss making units?
  • What the hell is this FBT thing? Yeah, I know it was introduced in the last budget because someone went brain dead but continued writing the budget. Don’t you think it should have been scrapped?
  • And hey, all this cess and surcharge needs to be done away with. You ALREADY collect taxes for doing things that the government is supposed to do - like building roads, providing basic education etc. Why the hell do you have a road cess (on petrol) and an education cess (on all taxes)??

Has the dream merchant stopped daring to dream?

1 comment:

Aman said...

stopped daring to dream? the finance minister seems to have gone brain dead! he just can't dream anymore! the urban middle class are ones who pay all the taxes and they have been the ones most ruthlessly thrown aside in the budget! take our money and go drain it on small farmers! one heck of a budget! bull shitt