Congress came to power once again with its big propaganda of economic populism which at this point in time the country is struggling hard to afford. Finance Minister Pranab Mukherjee was explicit in announcing the budget saying that this budget is more focused on the Aam Adami, which is of course a sting to the present political scene in the country. For the fist time ever there was a income tax reduction for the elite class where the tax level fell from 33.9% to 30.9%.
Talking about the Aam Adami, extended loan, job guarantees to the poor, health care programmes etc round up to 1.3% of the current GDP which is on the growth agenda according to the Budget.
The Budget is Pragmatic because it is looking at 9% economic growth. Well I am not being cynical when I am questioning if this is an achievable target as we were hit big time by the recession. Of course, this quarter has shown progress, the market is looking up and the next quarter looks just about good. Growth is a natural culmination of any proposal made for economic growth.
The current budget has allocated funds to almost all the sectors which means it is Inclusive. But then it is of course the discretion of the ruling party and is it going to continue being focus and result oriented again is a doubt?
I love the word growth, because it gives me a sense & feel of satisfaction that yes there are eggs in the basket to be hatched which will eventually result into chickens which will get me profit once they are sold, but then again they shouldn’t be hit by bird flu and their market rate should either remain constant or rise…And thus growth cannot be excluded in the budget agenda. Yes my description to Growth Oriented budget is metaphorical, but that’s the way I can relate to the term growth!
Snapshot of the Budget Impact on various sectors:
Retail Sector :
- Abolition of the FBT (Fringe Benefit Tax). Aviation industry gains the maximum out of this.
- Personal income tax exemption hiked, which means less tax payment for the middle & higher middle class, resulting in increased spending capacity, leading the retail sectors like a Big Bazaar, Pantaloons, Westside etc to gain in the bargain
- Maruti, Bajaj Auto & Hero Honda have been in the league of the out performers and Tata Motors has been under performer
- The Global financial crisis has hot the automobile sector hard in FY09 and fall in the demand of cars and two-wheelers seen because of job loss
- The FMCG sector has shown a growth of 16.2% in the financial year 2009
- Price-cuts on account of lower inflation and excise duty reduction from 14 per cent to 8 per cent led the FMCG companies to reduce their product prices in a bid to boost volumes
- FMCG industry is set to grow 20-30 per cent in 2009-10, up from 10-20% in 2008-09. The growth would be driven by the launch of new products and increasing rural consumption.
- The global economic downturn in FY09 resulted in demand-side challenges for IT/ITES service providers, in terms of reduced IT spending.
- The economic outlook for the U.S. and U.K., which accounted for around 60% and 20% of Indian IT/ITeS export revenues respectively in CY08, remains gloomy. The negative stance of the U.S. towards outsourcing to the emerging economies has also increased concerns for the sector.
- Although, Banking and Financial Services Industry (BFSI), the worst-hit sector, accounts for the majority of Indian IT and Business Process Outsourcing (BPO) exports, Indian companies are expanding their portfolios to other sectors like telecom and retail
- Deduction in respect of export profits under sections 10A and 10B of the Income-tax Act, applicable to Software Technology Parks in India (STPIs) and hitherto scheduled to be discontinued in FY10, has been proposed to be extended by one more year i.e. till FY11.
- An allocation of Rs.120 crore has been proposed to set up online data base containing identity and biometric details of Indian residents under the aegis of Unique Identification Authority of India (UIDAI).
Well one cannot afford to please everyone and here is what a few analysts and industry experts have to say about the budget.
“The budget is Rhetoric and unrealistic”
“The advocates of irrational neoliberal reforms seem to be out of tune with what is feasible in capitalist economies that are functioning political democracies.”
“Incoherent and self-contradictory, Pranab Muherjee’s budget is inadequate to meet the government’s objective of higher growth with a human face”
That’s my view as well as a study of the current budget.