The Left influence

On the face of it, it looks like a Left-oriented Budget. The signal that goes out to the market is that status quo remains, that it has slid back a little bit, that it is more populist, and that the Left has a tremendous influence on the proposals.

For the corporate sector, the status quo remains, but with the huge penalty of having to pay non-recoverable education cess. There is no investment allowance or depreciation benefits. There is no change in dividend tax. The industry had expected certain fillips in the form of development rebate and incentives for exports. I feel India is definitely at a growth stage. Some kind of impetus needs to be given. But, they seem to be missing in the Budget.

While there is no need to give incentives, companies should not be punished for good performance. Now, there''s a penalty of 2% on all taxes paid by corporates and individuals. Even export profit will be taxed. This will definitely affect profit margins and lead to inflation.

The government plans to raise Rs 4,000 crore to Rs 5,000 crore from this cess. I feel the government could have easily raised this money from disinvestment. It now plans to raise about Rs 4,000 crore by selling stakes in PSUs. It has got nothing to lose by disinvesting more to raise another Rs 4,000 crore. I am rather disappointed that the government has fully back-tracked on disinvestment.

Again, I don''t see why the excise duty on steel has to go up. At best, excise duty should come down a little and at worst, it should stay where it is. As such, steel is highly priced in India and the increase in excise duty will affect everyone who uses steel.

The 150% tax exemption for automobile sector research and development is a welcome move. But, I am not sure if it applies to the auto component sector too. The Budget has talked about setting up a council for promoting competitiveness of Indian industry. While it is a welcome measure, I feel competition is enterprise-driven, and it is up to an individual company to be competitive.

There has been some good news for small scale industries — capital subsidy has gone up from Rs 40 lakh to Rs 1 crore. But, I have got a different idea about SSIs. I feel they must stand on their own competitiveness. How long can the government support the sector? With the support, SSIs have no incentive to grow and they continue to remain small. The US has a lot of SSIs, but they are nimble and are competitive in their own right.