Budget

The time of the year to dissect the Annual Budget :)...obviously if you are an expert...But I am neither an expert nor an individual who possess the wherewithal (if I can say so) to do so...but here is my viewpoint on it.

Well I wouldnt like to start on the hottest topic to discuss - the Rs. 60000 crore loan waiver to the farmers ( might come up with another blog for it, think it deserves atleast that...;) ) Lets start with the excise duty cut given to the pharma and auto sector. The honourable FM says that manufacturing is the worst hit sector and it being the backbone of any economy should be supported. His view being that "consumption drives production and production drives investment". So he has decreased it to 8% from the previous 16%.

So now you can buy a car of your dreams and still have enough in your pocket to buy fuel for it....Add to it the increase in the threshold limit of exemption from personal income tax... Has the "Mission impossible" really be accomplished.Will there be surge in the demand for the cars?...Well seems so...or does it?...Firstly, yes the prices will be slashed by at least Rs. 10000-12000 for sure and as high as 1.25 lakhs for the high end models...But wasnt the consumption more dependent on the interest rate (of the loan) than the actual price?...Isnt the interest rate dependent on the inflation which has forced the interest rate not to be dropped?...So I dont think its going to drive the demand as much as it is expected to do...

Also the point to be noted out here is that the previous excise duty cut from 32% to 24% by the Jaswant Singh's gov didnot percolate down to consumers in the long run as the manufacturers progressively hiked the prices to nullify the effect of the duty cut...Will history repeat itself?...HOPE it doesnot...

Coming to the pharma sector, here again the question arises whether the cuts would benefit the consumers...What is being said by the pharma bigwigs suggests that a small cut in prices of the drugs is expected but the good news is to end here. The major portion of the cut is going to be utilized for the pharma infrastructure which they say would benefit the consumers in the long run but as everyone knows - its better not to believe anything until it is officially denied.

Yes you would have more take home salary from this year owing to the the increased in the threshold limit but if you check more closely for an income of Rs 50,000 per month, it means close to Rs. 5750 deducted through direct taxes and (hold your breath), if you spend this savings in groceries, your mobiles, FMCG products; the government will get 1 Re from every 4 Rs. you spend through the indirect tax route ( service tax in case of your mobile bills). So its going to benefit the consumers but gov is not bearing any loss of income from this...so hats off to Mr. FM and not to forget that extra spending will mean that sales revenue is going to rise for the corporates. This actually means higher corporate taxes to the gov because the corporate tax rate is not cut....

Then the person would think y spend, lets invest it. Here too, FM has a hidden agenda. He has increased the short term capital gains tax to 15% so to avoid that, you will have to invest your amount for long term which is absolutely very much necessary and I think its a move in the right direction...again the gr8 economist at his best....

Finally any budget is an electoral budget because budget is not to antagonize the people...so no debate on this...:)