Top 5 Expectations from Union Budget 2012 !
The centre of attraction Assembly Election 2012 results is out of the way now. All spotlights will now focus on the Union Budget 2012 announcement on March 16. Prior to that, the Union Minister of Railways Dinesh Trivedi will narrate the Railways Budget on March 14.
In fact, days before the Budget, the Indian Railways has dropped the bomb on the industry by hiking freight charges by up to 25% for most commodities including coal, food grains and fertilizers, raising fresh fears of stoking inflation further. However, railways have reduced rates for iron ore exports by up to 4%, by shifting it away from the most expensive class and reworking the distance slabs.
In this post, we will try to put across expectations from the Union Budget 2012 from the aam-aadmi and corporate India’s point of view. Hopefully, Finance Minister Pranab’da comes true to the public expectations by balancing both the social and industrial obligations of the government.
1) Modernization of Railways: Most of Indian railway infrastructure was built during the British rule in the country and has outlived its utility to say the least. India now needs complete up-gradation of railway’s communication system and centralized train motoring system. Sam Pitroda has pegged the total expenses for railway modernization roadmap at Rs.8 lakh crore, over the next 5 years. The big question – how will government arrange for such a huge sum, though gradually?
2) Implementation of Tax Reforms: The top-most priority at the Centre should be fast implementation of the two main tax reforms – Direct Tax Code (DTC) and the Goods and Service Tax (GST) – that has been on the back-burner since last two years.
In fact, prompt implementation of GST in itself is likely to add around 1%-1.5% to GDP growth. It would also result in moderation of rates, simplification of laws and better compliance.
3) Start Fiscal Consolidation: With the election season come to a draw, its high time that the government withdraw some of the highly populist measures played as a part of its vote bank politics.
The gross fiscal deficit in the 2011-12 at 5.5% of GDP is unlikely to meet the government’s fiscal projection of 4.6%, in the back drop of faltering economic growth and skewed tax revenue collection. The only possibility of a bailout in the new fiscal year could be windfall gains from auction of 2G or 4G telecom licenses.
4) Align Personal Tax slabs to DTC thresholds: Common man automatically comes under the radar when we speak about personal tax slabs; it goes without saying that the expectations of an aam-aadmi is almost always skewed towards increase in tax exemption limits, as a relief from high inflation eating into their wealth.
This year should be no different – Pranab Mukherjee is expected to align the personal tax slabs in this budget to proposed DTC thresholds, to narrow down the differences in the structure and swift carry over to the new direct tax law. We can expect the minimum income limit not subject to tax to be raised to Rs.2 lakh from the prevailing Rs.1.9 lakh threshold.
5) Deregulation of Diesel prices: The government has de-regulated petrol prices in the past, but it still provides subsidies on other fuel products such as diesel and kerosene oil to enable the common man to have access to these basic necessities at affordable prices.
The under-recoveries on the sale of price-controlled fuels for FY12 has left a hole in the exchequer’s pocket to the tune of almost Rs.97,313 crore up to December 2011, as per a report. Moreover, under-recoveries from subsidized diesel sales has ballooned to more than Rs.56,700 crore in the first nine months of FY12.
What say? Do you have any special expectation from Pranab’da?