Monday, 23 June 2014

The NDA Budget, What will Mr. Jaitely bring to the table....



Mr. Arun Jaitley, Cabinet Minister for Finance seems to be working full time preparing for the budget that is to be presented in the first few weeks of July, the interim budget that was put in place by the previous government will be in effect till the 31st of July, 2014.

A lot has been said and done till now, but the fact of the matter remains is that the highest tax paying segment in the country is that of the urban middle class, invariably they are the same people who are facing troubles because of high inflation and ever rising cost of essential commodities. The SME sector has also been going through a tough phase and needs support to compete with imports coming to India at a cheaper rate. The industrial growth in India has also been limited due to various factors.

A lot is required to be done and what all should be on priority, Mr. Jaitley seems to be trying to find out ways and methods to balance everything, before the same is presented in the parliament, as everyone is eyeing the budget, specially the opposition and they will not spare any opportunity to take a dig on the new regime, which came with a promise of "Acche Din Aane Waale Hai", Good days are about to come. Things like Railway fare hike and power shortage in Delhi have already given ample opportunity to the opposition to make noise about the new regime.

The common man is looking at the budget wide eyed and is of the belief that things will turn around in a day, but that is not possible. Mr. Modi, the honourable Prime Minister of India has already talked about the bitter pill approach to make things right a few days back, if that is to be taken as an indication it seems that there wouldn't be many relaxations in the budget as far as taxation related issues of the common man are concerned. We might see some sort of a rationalisation in terms of tax brackets and easier rules in terms of tax exemptions for the common man. The budget should be inclusive for all and the urban middle class should be considered during the policy making process, as they are stuck in a situation where they have to maintain a certain standard of living and at the same time manage costs of living.

The industry is also looking forward to the budget, but with a caution no one is sure as to what bitter pill is about to come their way. The automotive sector which got the benefit of excise cut, is hopeful that the same remains intact and they are not required to increase the prices.

The industry at large is hoping to get a bouquet of incentives for setting up new units in the form of tax free or tax benefit zones like the ones set-up by the previous NDA regime in Himachal PradeshThe etc., but what one needs to understand is that such schemes are not a permanent solution for development. Let's look at industrial growth in Himachal Pradesh, more than 5000 manufacturing units came up in Baddi industrial area all of a sudden, which resulted in man power crisis and sudden price rise for land. The main purpose for most industries established in such regions,  was just to take advantage of the 10 year tax relief. Most of the units have already stopped working or are in the process of shutting down shop as the cost benefit that brought them there does not exist any more. The government can look at providing a blanket tax benefit to industrialist on setting up new units across the country barring a few Industrial hubs, which already have high penetration. this would not only ensure better spread but also not result in worker shortage as is the case in Himachal Pradesh.

The SME sector has been hit hard by cheap imports, specially from China, the government needs to look into the same with urgency. Although the government has announced certain zones for electronic related industries but these industries require support to fight against cheap imports. A lot of small scale units which were operational till about 15 years a go have shut down shop due to severe competition from Chinese imports, these industries could have been saved if appropriate taxes and standards are imposed on imported goods. At one end you expect in-house industry to pay excise and other taxes, but you allow importers to import goods duty free, this results in severe pricing pressures and make industry at home unviable.

The government also needs to make sure that rules are not brought about with retrospective effect, this causes worry in foreign investors, as they are not sure whether the investment made today is going to remain the same going forward or not. There is also a need to safe-guard the rights of small businessmen against multinational giants, the FDI in retail sector although a good move, one needs to make sure that these vendors are monitored strictly for compliance on a regular basis. For example when you call a business cash & carry it should be strictly that, the case as of now is that it is killing the small vendor as anyone can venture into such stores and buy items. There are also many issues pertaining to input VAT and that small distributors are facing which these giants are able to sideline.

The article can go on and on about what is expected from the budget, but for now let us all keep our fingers crossed and see what Mr. Jaitley has in store for all of us.

We at Indian Politics Mounted would appreciate if we get comments on these articles, as they will guide us in a better way going forward...

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