Budget 2014…

The Budget our new FM presented on Thursday lacked winner spirit… Politics is the art of making impossible possible… I do not know why our FM felt so constrained, even of words, a good vision of five-years down the line should had let the stock prices rejoice the event… what ever it has proposed to do, fiscal-deficit mainly, was inherited by the past government… He has sought to bring/maintain fiscal deficit at 4.1% for the year 14-15, in 15-16 it will be reduced to 3.6%, 3.3% by 16-17 and by 3 by 17, a straight pick from the past government… But, it is not without reason, the position our FM received from the past government did not present many opportunities… But, a government must always present its plan in advance… It has many advantages… The government must consistently underline its VISION to increase its credibility… However, there was actually no big difference in the style of running the government and, many past events verify the fact, too… The government this year has increased the tax-exemption from 2 lakh to 2.5 lakh whereas tax on income of 2.5-5 lakh maintained at 10%, for 6-9 lakh income group tax rate would be 20%, and for 10 lakh and more income would be taxed at 30%. Moreover, other taxes are almost kept unchanged which does not affect demand much. The government has tried to keep prices lower than to increase income except increase in tax-exemption limit to 2.5 lakh... However, the job of our new FM was not less difficult than walking a tight-rope and he has managed well to keep the tone of rating agencies down. Our FM has impressed everybody with his expertise...

The budget has allocated Rs 100 to Rs 2500 crore on a variety of heads which indicates that our FM has tried to give attention to all important issues. The government looking at the fiscal picture is trying to rationalize subsidies on food and petroleum by better targeting them to the poor. The government will follow path of fiscal-consolidation by curbing wasteful expenditure. The government has set aside Rs 500 crore as Price-Stabilization-Fund to bring stability in the general-price-level by improving the supply-side… But, that is not as straight as it seems… Rupee will help when we have to buy goods and services in the domestic-market, but when it comes to international supply then a foreign exchange reserve will be more helpful… Skill development according to the Industry demand is likely to have a multiplier effect on job creation. Skill-development is more important from the point of view of per-capita income because it increases productivity of the workforce and they receive higher wages and income, demand increases…To improve the savings growth-rate of economy the government has made Fixed-Deposits attractive as compared to debt by increasing taxes on the same… The budget has allocated Rs 1000 crore for irrigation in case of drought under Pradhan Mantri Gram Sichayi Yojna (PMGSY) and many other facilities to agriculture...

The budget has tried to increase tax collection by increasing excise-duty on many items like cigarette and tobacco, and, increase demand by reducing customs-duty on many items like soaps, footwear, mobiles, and cosmetics. In the budget excise-duty on cigarette has been raised between, 11% to 72 %. Moreover, the government has increased excise-duty on pan-masala from 12% to 16%, on manufactured-tobacco excise-duty has been increased from 50-55% and 60-70% on chewing tobacco and gutkha. Moreover, our FM proposed to levy additional excise-duty of 5% on aerated-drinks (cold-drinks)… Custom-duty on imported steel items has been increased from 5% to 7.5%. Cathode TVs which is mainly used by weaker sections has been fully exempted from custom-duty. Precious stones and semi-precious stone are also fully exempted from basic custom-duties. Cosmetic, certain pharma and soaps have become cheaper after custom-duty reduction. Moreover, mobile sim-cards, domestically assembled computers and laptops, certain apparels, cotton-clothes and other products, LEDs and LCDs (below 19 inch), and solar energy equipments have become cheaper after custom duty reductions.  

Recently it was in NEWS that when a former BJP finance minister met Dr Raghuram Rajan, back in the 90s, he advised him to give construction a thrust to give the growth-rate a push… Now it has been a trend in almost all the countries that they try to give growth and employment a push by investing in the real estate sector… Real estate is an employment intensive sector and consumes mostly unskilled labor and in a country like INDIA, where the workforce is largely unskilled, is easiest to give people employment…  Therefore, like his predecessor Chidambaram, our FM tried to give the sector a boost by increasing demand for loans for more homes. The FM presented a road-map for “house for all” by 2022 and with a dream to set-up 100 modern cities with an investment of Rs 7060 crores, he did the same thing, gave the real estate a boost. 100 new high-tech-smart-cities will require more construction. Every-body knew that Modi government will give special attention to infrastructure. Moreover, Rs 37, 000 crore is likely to be spent on National-Highways to improve infrastructure and supply chain. NHs equal to 8,500 km of has been promised and another Rs 14, 000 crore is planned to be spent on roads in rural areas under Pradhan-Mantri-Gram-Sarak-Yojna (PMGSY)… The government looks very liberal as far as investment in infrastructure is concerned...

On the jobs front which is the real sector of the economy the track of the Indian economy has been not bad… Unemployment-rate of the Indian economy was around 5-6% in the past years which is close to equilibrium level… But, with a population growth rate of 17% per-ten-years Indian-Economy must add 12 million jobs a year to keep unemployment-rate near equilibrium… The recent budget is expected to add 5-8 million jobs, multiplier included, in the next 2-3 years which is less than our per year target of 12 million jobs a year… We are under-shooting our target… Unemployment rate for the economy is acceptable but the per-capita-income of INDIA is low… Nevertheless, wages and income have increased in the past few years but inflation has kept real-wages and income low and the RBI and government are trying to improve stability in prices… Therefore, on both, full-employment and price-stability we are going through a transition period and expect that jobs and prices will improve ahead because we are expecting growth rate to improve too… More jobs will be added and inflation will come down… Our Budget this year looks sound on these fronts… Satisfactory jobs growth with low growth-rates and lower inflation due to low fiscal-expenditure… Expected… along the lines…  Hope… the Indian-Economy performs better, near, 7-8%, so that we can add more jobs to close gap between jobs and unemployed…