Amar Ambani, VP Research, India Infoline
Budget 2010-11 has proved to be the best one in recent years. A key positive was a substantial increase in personal income tax slabs and a rise in the exemption limits. Not only will this help in boosting consumption, but also widen the tax base and grow the government's revenue kitty. While we expected the fiscal deficit target of 5.5% set for FY11, the roadmap for three years was a strong signal on fiscal consolidation (4.8% in FY12 and 4.1% in FY13). Furthermore, the government set a reasonably low borrowing target of Rs 3,450 billion. The stock market also took comfort from the fact that excise duties were rolled back by only 2% and the service tax remained unchanged.
The FM sent a strong signal by reporting a 6.9% fiscal deficit for FY10, targeting 8.5% GDP growth in FY11 and 10%+ in subsequent years. Although delayed implementation of GST was known, what is encouraging is that a deadline has now been set for April 2011.
We see faster policy momentum in times to come with targeted disinvestments of Rs 250bn, direct subsidy to farmers and the construction of 20kms of national highways per day.
The major negative was the increase in MAT rates on book profits from 15% to 18%. Another negative was the levy of 5.5% import duty on crude and 7.5% on petrol and diesel, and a Rs 1 increase in the excise duty on petrol and diesel. A roadmap for 3G, attempts at plugging system leakages and a larger focus on food security were missing.
All in all, the positives outweigh the negatives.