Any budget is judged in terms of its effect on
demand and supply in order to achieve investment, employment and growth...
There has been a push by our FM in the budget to increase investment in the
economy especially by the crowd-in-effect of infrastructure, including railways...
A lot is dependent on good infrastructure when the private-sector is overleveraged and
facing problem of bad-debt... To improve the condition of infrastructure in the
economy the government has proposed to bring tax free bonds along with a Rs 70,
000 crore investment which is good... However, how the government works-out the complete plan is yet
to be seen... It has ideas, like PF funds and oversees bonds, but it needs to
be implemented.... Rs 10,.000 crore has also been allocated to the railways... The
government has decided to change excise duty on petrol as Road-cess and invest
the money in the rail and road infrastructure... The money we will get selling
gold coins could also be channelled to infrastructure... In the power sector we
need more companies in production and distribution to increase supply and
reduce prices... According to our Railway minister rail-fuel-cost remains high
despite of lower diesel prices but high power bill... Power should be made
affordable for consumption and production, too... FM has given money for many
big power projects... The RBI has around $ 20 billion in gold reserves which it
can put in circulation for investment... Infrastructure is a must for rapid
development and will create alot of demand within the economy; demand for other
things will go up...
The government’s focus on infrastructure is indeed a
brightest-spot in the budget and after that corporate tax reduction from
current 30% to 25% in the four-years which is also expansionary in terms of
income and demand... It will get translated in lower prices of goods and
services in the years to come... For this year, corporate-tax reduction should
be around 1%... Moreover, reduction in duties of several products will increase
their demand by becoming more affordable... However increase in surcharge by 2%
on super-rich will improve the revenue... Hike in service tax to 14% will
affect consumer, but will increase revenues... All the small increases in taxes
here and there seem justified as long as fiscal-deficit target of the following
years are concerned... The government will have less and less fiscal-space as
we go ahead every year even when the economy is yet entangled in the supply-side
constraints... roads, storage and marketing policies... The government is
likely to find out more ways (more resources) to bridge the gap between the
public needs and means...
In order to give rural population a demand boost the
minister has allocated Rs 5, 000 core additional resources to MGREGA... But the
budget was not very vocal about its direction, its orientation to make it more
human-capital and infrastructure based... The government has given Rs 1500
crore for the skill-development of the rural youth to get them placed according
to industry demand... The FM has underscored the need to match skills with job-opportunities...
The government has tried to cover all in universal
healthcare and pension under the social security system...
Allocation to a number of schemes which will directly
affect poor-people in terms of cash transfer... As far as demand and multiplier
is concerned it is highest for poor because they spend all of the cash and save
little... It will also give room to divergence of funds to other goods and
services... it will increase demand...
The government has used all levers to increase
demand and investment in the economy with a push to increase infrastructure
facilities...
Whenever you decrease tax it means you have given
extra purchasing power to agents and they will spend-off the money on other
heads... it is an incentive in terms of savings and demand... it goes viral...
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