Macro-economic stability is back in vogue. The gross fiscal deficit has been reined in at 5.1 per cent of GDP and is expected to go down further to 4.6 per cent in 2011-12. Government expenditure is expected to grow by just 3.3 per cent over the revised estimates of 2010-11. Compared to the budgetary estimates, this will be 13.4 per cent higher. These growth rates are much lower than the trend seen in the past five years when the year-on-year growth rates averaged at over 19 per cent a year. Some numbers do not add up. For example, although the NREGA expenses are now indexed to the Consumer Price Index ,they are the same as last year. Possibly, the expenses will be higher than budgeted.
While tax rates have remained largely unchanged, exemptions are being eliminated. If the Budget’s silence on the extension of exemption to the Software Technology Parks of India (STPI) is any indication, then, implicitly, one of the largest direct tax exemptions will end this month. If this is true, the Budget's direct tax collection seems to be underestimated and revenues could be higher than budgeted. The levying of MAT on developers of SEZs and units operating in SEZs ensures there are no escape routes for the STPI units.
Mahesh Vyas
Managing Director & CEO, Centre for Monitoring, Indian Economy