At the end of a remarkable fiscal year, the finance minister has done an excellent job that tries to remove the bottleneck that had caused inflation and are coming in the way of faster development. The realistic Budget focuses on high growth and making the growth inclusive. This will pave the way of building a resilient economy.
Without any net additional taxation, direct and indirect taxes taking together, the finance minister has imparted some stability to the tax system. He has reduced the surcharge on corporate income tax from 7.5 per cent to 5 per cent and increased the Minimum Alternate Tax (MAT) marginally to 18.5 per cent while extending the same to special economic zones. This has created the ground for introducing the Direct Tax Code from April 2012.
The continuance of service tax and excise at 10 per cent will facilitate adoption of the Goods and Services Tax (GST) possibly next year. The finance minister’s guiding principles of modernisation and simplicity in taxes are commendable. He has also given close attention to alleviation of food inflation and for that reason provided for additional expenditure on agriculture and exempted agricultural machinery from commodity taxes. Similarly, the investment in infrastructure will be 23 per cent higher under public-private partnership.
It is significant that the finance minister has increased the amount the foreign institutional investors can invest in bonds. Along with the facility for remittance of dividends by companies overseas, this will also help fund the balance of trade deficit.
It is remarkable that the finance minister has, without increasing taxes, been able to reduce the fiscal deficit to 4.6 per cent of the GDP. This will ease the borrowing by private sector and promote faster development.
Sanjiv Goenka
Vice Chairman, RPG Enterprises