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Focus is on masses, not classes

 

It is a budget for the masses, not classes. It offers small giveaways here and there but takes care not to hurt anybody ahead of assembly elections. The 2010-11 Union Budget’s thrust is on the social sector in keeping with the UPA government’s goal of inclusive growth. It carries the stamp of Congress president Sonia Gandhi. Prime Minister Manmohan Singh’s reforms may have to wait. Finance Minister Pranab Mukherjee is a pragmatic politician and he is best suited for building a consensus on controversial reforms like the goods and services tax (GST), diesel decontrol, labour law amendments, foreign investment in multi-brand retail, banking and PSU privatisation. 

The GST, when implemented, would have far-reaching consequences on the economy in terms of lowering taxes and raising revenue by curbing tax evasion and the spread of black money. 

Benefits for classes are limited. The salaried class may be disappointed by a modest hike in the tax exemption limit but there is a major reason to cheer. Those having salary as the only income will not have to file returns any more. 

The Budget has reduced the age limit for senior citizens from 65 to 60 for being entitled to the tax exemption limit of Rs 2, 50,000, while for those above 80 a new tax exemption limit of Rs 5,00,000 has been created. Health check-ups in private hospitals will become more expensive. Domestic and foreign travel will cost more as also eating out in AC restaurants. 

This time the fair sex has got no special treatment. Those fond of branded clothes will feel the pinch. 

Aanganwari workers have a reason to rejoice as their pay has been justifiably doubled. 

Soldiers suffering 100 per cent disability in service will get Rs 9 lakh compensation on a par with security personnel fighting the Maoists. 

In the clash between inflation and growth the Finance Minister has favoured the former, which is desirable both politically and morally since the fruits of growth are enjoyed by a small section. From March 2012 those living below the poverty line will start getting cash instead of subsidised fertilisers and fuel. Nandan Nilekani’s Adhaar scheme, when implemented, would make this possible. 

Sonia Gandhi’s favourite project, the National Food Security Bill, is on the table but Pranab Mukherjee has not given details of the fiscal impact of its implementation. Higher spending on education, health and infrastructure is welcome though it is still below the desirable levels.

To control inflation and achieve double-digit growth it has often been suggested that agriculture should be rejuvenated. The budget has increased credit flows to farmers by Rs 1lakh crore. 

Farmers who repay their loans in time will have to pay 3-4 per cent lower interest than the market rates. To step up production and productivity, the budget provides Rs 300 crore each for pulses, oilseeds, vegetables and nutri-cereals like millet and maize. Since 40 per cent of food items go waste in the absence of adequate storage and processing, the budget focusses on some such grey areas. Cold storage chains will get infrastructure status, which means cheaper credit. This may attract higher private investment and help eliminate bottlenecks in food supplies. 

Industry had feared a rollback of tax benefits given in 2008 to help it cope with global slowdown. That has not happened. Instead the surcharge on domestic companies has been cut to 5 per cent from 7.5 per cent. The minimum alternate tax (MAT) has been slightly raised from 18 per cent to 18.5 per cent. The Sensex shot up after the budget but the gains were trimmed to 122 points by the close. Currently, business confidence is low as interest rates are hardening. The surge in global oil prices due to trouble in the Middle East has led to capital outflows. 

For foreign institutional investors (FIIs) a high fiscal deficit is also a matter of concern. The Finance Minister has sent a positive message by bringing down fiscal deficit to 5.1 per cent. FIIs, however, are skeptical about his claims of bringing fiscal deficit further down to 4.6 per cent and ensuring 9 per cent growth in a difficult year ahead. One positive is the government will resort to lower market borrowings and this will reduce pressure on money supply and subsequently on interest rates. High interest rates raise the cost of capital and hurt growth. All in all, given the constraints — political and global — it is hard to find much fault with the budget. Its goal of inclusive growth is right. The fiscal deficit may be under control but it is governance deficit which is becoming unmanageable. Elections are won not just by tall promises but by strong performance.

Bihar has shown votes follow development.

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India is the largest democracy and is fourth largest economy (in terms of purchasing power parity) in the world. India with its consistent growth performance and abundant high-skilled manpower provides enormous opportunity for investment, both domestic and foreign. Investment in India can be made both by non-resident as well as resident Indian entities. Any non-resident investing in an Indian company is Foreign Direct Investment (FDI).

The Government embarked upon major economic reforms since mid-1991 with a view to integrate with the world economy, and to emerge as a significant player in the globalization process. Reforms undertaken include decontrol of industries from the stringent regulatory process; simplification of investment procedures, promotion of foreign direct investment (FDI), liberalisation of exchange control, rationalization of taxes and public sector divestment. The FDI policy was liberalized progressively through review of the policy on an ongoing basis and allowing FDI in more industries under the automatic route.

A number of studies in the recent past have highlighted on growing attractiveness of India as an investment destination. According to UNCTAD’s World Investment Report 2007, India is the second most attractive investment destination for FDI for 2007-09.

India has one of the most liberal and transparent policies on FDI among the emerging economies. FDI up to 100 percent is allowed under automatic route in all activities and sectors except few sectors like manufacturing of cigar and cigarettes of tobacco, electronic aerospace and defense equipments, etc.

FDI policy is reviewed on continuous basis and changes in sectoral polices / sectoral equity cap are notified through press notes by the Secretariat for Industrial Assistance (SIA) , Department of Industrial policy and promotion (DIIP). FDI policy is also notified by Reserve Bank of India (RBI) under Foreign Exchange Management Act (FEMA) 1991.

FDI in sectors /activities to the extent permitted under automatic route does not require any prior approval either by the Government or Reserve Bank of India. The investor is only required to notify the Concerned Regional office of RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares to foreign investors.

The Government has decided to allow FDI up to 51 percent; with prior Government approval, in retail ‘single brand products’. This is inter-alia aimed at attracting investment in production and marketing, improving the availability of such goods for the consumers, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprise through access to global designs, technology and management practices.

The Government has put in place a liberal foreign technology transfer policy as well. At present, foreign technology collaboration involving payment of lump sum amount of up to US$2 million and/or royalty at the rate of 5 percent on domestic sales and 8 percent on exports are allowed under the automatic route. There are no limits on the duration of royalty payments. In addition, the current policy also allows payment of royalty up to 2% on exports and 1% on domestic sales under the automatic route for use of trademark and brand names of the foreign collaborator without technology transfer. Proposals involving royalty payments beyond the limits under the automatic route are considered for Government approval through the Project Approval Board (PAB).

The Government has set guidelines for transfer of ownership or control of Indian companies in sectors with caps from resident Indian citizens to non-resident entities.

Its salient features are:

Government/FIPB approval will be required in sectors with caps where:

• An Indian company is being established with foreign investment and is owned by a non-resident entity or

• An Indian company is being established with foreign investment and is controlled by a non-resident entity or

• The control of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity, as a consequence of transfer of shares to non-resident entities through amalgamation, merger, acquisition etc. or

• The ownership of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares to non-resident entities through amalgamation, merger, acquisition etc.

The new proposals will yield following benefits: The proposal would ensure application of simple, homogenous and uniform norms for calculation of direct and indirect foreign investment across sectors excepting those where it is governed specifically under any statutes or rules there under. And, it would also ensure that approval of Government/FIPB would be required for establishment/change in ownership or control of an Indian company from resident Indian citizens to non-resident entities in sectors with sectoral caps.

India has a young demographic profile with about 50 percent of its population under 25 years, having high propensity to consume. About 20-25 million people are joining the middle class, every year with increasing disposable income. This phenomenon could be leveraged to attract investment as well as to generate employment.

A decade and a half ago the prospect of India becoming a major player in the global economy seemed a distance dream, today with the power of FDI it is a reality. During the last five years there has been a sea change not only in the world perception about India’s future, but in our own perception about us. The world has acknowledged the ‘arrival of India’. With the ushering of social and economic base, we no longer discuss the future of India: we say “the future is India”.

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सकारात्मक पहलू विकास दर में बढ़ोत्तरी बढ़ता विदेशी निवेश औद्योगिक और सेवा क्षेत्र में विकास विदेशी मुद्रा भंडार में वृद्धि सेंसेक्स में लगातार उछाल मुद्रा स्फ़ीति काबू में

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एक ओर होंगे सेवा क्षेत्र और विदेशी निवेश जैसे पहलू जहाँ माहौल सकारात्मक है. दूसरी तरफ़ है मध्यम वर्ग की अर्थव्यवस्था जिमसें अपार संभावनाएँ हैं लेकिन कई तरह की परेशानियाँ भी हैं और तीसरे स्तर पर है एक ऐसा वर्ग जिसका ऊपर के दो वर्गों से कोई लेना देना नहीं है, उनकी समस्याएँ शायद वैसी की वैसी रहने वाली हैं. आलोक पुराणिक, विशेषज्ञ

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