Seen as anti-poor or anti-farmer. In the railway Budget too, against the expectation of an increase in the passenger fare, what we got was a status quo. Just before the Budget, the Opposition had united to give the impression that the Land Acquisition Act as anti-farmer, pushing the government on the back foot. After the heavy drubbing it got in Delhi assembly elections, the ruling party may have thought of not taking any chances, lest its policy may be construed as anti-people. This explains why the government did not touch upon as sensitive an issue such as the selling of loss-making public sector units or fixing a disinvestment target in the speech.
The government did give some hint that it planned to decrease corporate tax from 30 per cent to 25 per cent – perhaps in the next four years.
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But there would be no change in the tax rate for the next year. While reducing the tax rate, the government is also looking at doing away with certain exemptions, to ensure that its tax revenue would not be impacted. But this is^for the future.
Need corrective steps
Also, the fm did not hint whether the reduction of tax from 30 per cent to 25 per cent would be in one go or would it be gradual over the next four years. “The announcement to reduce the corporate tax over the next four years to 25 per cent is a welcome one,” says Adi Godrej, chairman, Godrej group. “However, there has been no incentive for manufacturing in this Budget. In fact, because of the surcharge, taxes on the manufacturing sector have increased. I do hope the finance minister reduces this surcharge on the manufacturing sector and takes some corrective steps before the Budget is passed.”
Many experts are calling this Budget positive and believe that this would be the game changer for the country. “The Budget is quite positive, aiming at 8.5 per cent GDP growth,” says Milind Barve, MD, HDFC AMC. “At the same time, the FM has laid down a clear road map for deficits. What is welcome is that the deficit targets are sound, as the minister has made fair assumptions for revenue projections, as also increased capital expenditure, which would
help create jobs and assets.”
But, during the short term, the market needed a big push to lift sentiment, as India Inc’s earnings for December were not up to the mark. Everyone was looking to the Budget to lift sentiment, but it looks as if it may not happen. Now, what is crucial for the market is to watch how the government would handle the land acquisition ordinance bill and insurance bill, which would give enough hint about the government’s ability to push reforms and, in turn, India Inc’s earnings.
The Budget may not lift India Inc’s earnings to any great extent. Today, the market looks expensive, as India Inc’s earnings have not grown as much as many were expecting. In fact, there is a high possibility that India Inc’s earnings may get revised downward. Keeping this in mind, the market may move only in a narrow zone, with a southward bias. While the Budget is good for the long term, what the market needed and was looking for was a short-term push, which has not been forthcoming.
♦ SUNIL DAMANIA [email protected]