Splurge! FM's new growth mantra
While the increase in salaries in line with the Sixth Pay Commission recommendations and the lower income-tax outgo would put more spending power in the consumer’s hand, lower indirect taxes would have a sobering impact on prices.
| MOTILAL OSWAL CMD, motilal oswal finance |
The Finance Minister has had the luxury of formulating the Budget against the backdrop of robust economic performance. Having said that, there were also significant challenges before him ��� ring inflation and the impending elections.
Considering both the challenges and the blessings, I believe that the finance minister has done a fair job.
He has reduced taxes, laid the foundation for consumption-led growth, taken steps to control inflation, and has cut revenue and fiscal deficit further.
The focus on agriculture and education has been maintained, though the emphasis on infrastructure appeared to be lacking.
However, the estimates for 2008-09 do not appear to have built in the impact of the huge loan waiver for farmers that the finance minister has proposed and the impending recommendations of the Sixth Pay Commission.
While the increase in salaries in line with the Sixth Pay Commission recommendations and the lower income-tax outgo would put more spending power in the consumer���s hand, lower indirect taxes would have a sobering impact on prices.
This could herald an era of consumption-led growth in the economy.
From a capital market���s point of view, some of the negative proposals could have been avoided.
For instance, hiking the short term capital gains tax from 10% to 15% was not desirable given that the incremental tax amounts will be small in relation to the impact on the overall market sentiment as well as liquidity.
Similarly, shifting the securities transaction tax from a tax to an eligible business expense would also hit the market volumes.
The introduction of a commodities transaction tax could adversely impact volumes in a nascent market where margins are low.
Considering both the challenges and the blessings, I believe that the finance minister has done a fair job.
He has reduced taxes, laid the foundation for consumption-led growth, taken steps to control inflation, and has cut revenue and fiscal deficit further.
The focus on agriculture and education has been maintained, though the emphasis on infrastructure appeared to be lacking.
However, the estimates for 2008-09 do not appear to have built in the impact of the huge loan waiver for farmers that the finance minister has proposed and the impending recommendations of the Sixth Pay Commission.
While the increase in salaries in line with the Sixth Pay Commission recommendations and the lower income-tax outgo would put more spending power in the consumer���s hand, lower indirect taxes would have a sobering impact on prices.
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This could herald an era of consumption-led growth in the economy.
From a capital market���s point of view, some of the negative proposals could have been avoided.
For instance, hiking the short term capital gains tax from 10% to 15% was not desirable given that the incremental tax amounts will be small in relation to the impact on the overall market sentiment as well as liquidity.
Similarly, shifting the securities transaction tax from a tax to an eligible business expense would also hit the market volumes.
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The introduction of a commodities transaction tax could adversely impact volumes in a nascent market where margins are low.
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