Instead of making great promises, the Budget has delivered on specific measures, though there has been no out-of-the-box reforms.
The government has ideally announced some concrete measures that will make an impact on the deficit immediately. The most straight-forward way to achieve this could have been raising the central excise tax, which has now been increased to 12 per cent.
Compared to 3.6 per cent of GDP in the current financial year, subsidies for FY13 have been budgeted at 2 per cent, and attempts would be made to further reduce it to 1.7 per cent in the next three years. This looks quite positive. This, however, looks tough to implement.
The reduction of 20 per cent in STT on delivery trades (which is just 10 per cent of the total turnover) has been much less than what was expected. This is quite disappointing. However, Rajiv Gandhi Equity Saving scheme for income tax deduction of 50 per cent for retail investors investing directly in equities should have a positive impact on the market. This shows that the government has recognised the importance of capital markets to attract financial savings.
Government expects FY13 GDP growth to be back on track at 7.6 per cent. If this works out, it will provide the common man with better job opportunities. However, for income tax payers, raising the exemption limit to Rs 2,00,000 provides little relief.
Overall, the Budget seems to be a “politically-cautious-economically-risky” one. This, probably, is the best the government could do, given the present state of political economy.
Raamdeo Agrawal Joint MD, Motilal Oswal Financial Services
