Friends,
At the out set, I must say a few words in praise of Pranab Da. He is a man of detail, he is a man of consensus, he is thoughtful, pragmatic and is a mature politician who has not been blinded by ambition and hence has not detracted all along his political journey. Through this budget he has demonstrated that he does not play to gallery just for the sake of being cheaply applauded as has been the case with many an earlier finance ministers. He has also not been tricky and has avoided complicated budgetary exercise in favour of simply garnering the required resources for the fiscal balancing of budget and has tried to keep the social spending while making sure that the applecart so delicately balanced at the moment is not upset. He has taken another step towards the regime having a new Direct Tax Code and GST. He has promised to further bring the fiscal deficit to lower percentage of 4.1% from the high of today and 5.5% for 2010-11 and we have no reason to disbelieve him. This is welcome from the angle of outside investors in Indian markets as they need not have worries about high deficit any more.
Coming to exact provisions of budget,the excise duties across board have been raised by two percent and is well digested by markets as it was already factored in prices. The personal income-tax has been lowered for the incomes upto Rs eight lacs and saves upto Rs 56 K for individuals. This too is a good provision. Thirdly, there has been some doses of tax on petroleum sector which would result in 4-5% retail-price rise for petrol/diesel. This is creating some hue and cry but meaninglessly. The class that affords these items is well poised to bear the burden. It is also a positive move for when the free pricing is accepted for petroleum products, the higher duties may be lowered as then the govt will no longer be carrying subsidy burden. Fourthly, the housing sector will be slightly under stress as the service tax will be payable on instalment payment to builders till occupation/completion certificate is available. But houses sold as finished units will have no service tax liability. This has a welcome angle also ie the builders will be far more quick in completing projects and then sell rather then starting many projects, involve customers money and move at slow pace towards completion. Fifthly, the tax deduction allowance on Rs 20000 in Infra-Bonds is direct help in cause of infrastructure development and hence a clear boost. This is a boost to steel and cement sectors also. Supposing one crore tax-payers choose to save this way, a grand sum of Rs 20 k crs will be available for infrastructure development additionally. The corporates have had relief in surcharge by 2.5% but have to suffer the MAT at 18% rather than 15%. Both together can be seen as of no damaging effect but would result in lesser incentive to fudge accounts. Aviation sector has to suffer for the imposition of service tax on fares. But should one really crib about it? The import of gold and silver will cost about a percent more. It could have been made to cost still more to import because the greater the burden lesser the import, leaving higher level of savings finding way into markets and other productive areas.
In fact, I am believer in the fact that India growth story is well founded on basic strengths of demography, abounding natural resources,trained man-power, enterpreneureship of high order,large and growing consuming market,well knit society, demography,readiness in adoption of new technologies,benign climatic conditions, saving orientation,role of English language,well constructed financial markets/exchanges,solid banking infrastructure and much more. Any budgetary flip-flop today or tomorrow can not derail out advance unless the politicians go all-out at looking for electoral advantage at big cost to economy as was done in times of Indiraji and later under Mandal influence. The warring Pakistan is no threat now, however, internally Naxalites have to be reined in. With 10% growth rate,the number of people crossing past poverty line will be numerous shrinking base of Naxalites. So,my humble advice to you is to be brave enough but intelligent enough at investing, I am there with you all the time,just take trouble to write to your concerns.
Hari Om,
Krsna Khandelwal
BIRDINFO Stock Rx - A prescription for stock market
