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Poll vault opens, more money in your pocket

The Budget is a please-all package from the FM, with a whopping Rs 60,000-crore largesse to farmers, reports Rajesh Mahapatra. Pics | Highlights | Vox Populi I: Video | Vox Populi II: Video | Vox Populi III: Video | Vox Populi IV: Video | Bonanza for farmers | Video

business Updated: Mar 01, 2008 01:37 IST
Rajesh Mahapatra

Cash, cars and cool climes; and a big-bang 60,000 crore-rupee debt relief for farmers. That’s Budget 2008-09 from Finance Minister P Chidambaram.

Coming as it does in an election year, it’s a please-all package that saves thousands of rupees for you in taxes, promises to make growth more inclusive and aims to boost consumption with a wide array of duty cuts so that the economy’s momentum remains intact.

If you are a salaried worker, beginning this April, you will carry home more money, because Chidambaram has rejigged the personal income tax slabs in a manner that cuts your annual tax liability by between Rs 4,000 and Rs 55,000, depending on how much you earn and where you save.

More good news if you work for the government: the Sixth Pay Commission will give its report by March 31, and Chidambaram was confident it would meet the expectations of millions of central government employees.

Cars, two-wheelers, air conditioners, medicines and set-top boxes, among other things, will now cost less.

The finance minister has cut the CENVAT rate from 16 per cent to 14 per cent, and reduced excise duties on automobiles, drugs and a host of consumer electronics goods and components.

Urban India gave an instant thumbs-up. An overwhelming 76 percent of people responding to a poll by Hindustan Times and market research firm C-Fore in four metropolitan cities rated the budget as either excellent or good.

The tax giveaways and the duty cuts are driven as much by an effort to boost consumption demand — a slackening of which has lately slowed the broader economy’s expansion — as by an intention to cheer the middle class, and in some cases help shore up corporate income.

“The India growth story, so far, has been an absorbing and inspiring tale,” Chidambaram said. “Once upon a time India, together with China, accounted for 50 percent of the world’s output. We must regain our position.”

India Inc was, however, disappointed. The minister made no change in corporate income tax. The stock market fell sharply — the Sensex shed 1.4 per cent — as Chidambaram increased short-term capital gains tax to 15 per cent from 10 per cent. There was also a new tax, on transactions over commodity exchanges.

“We were hoping the FM would get even bolder (with tax giveaways),” said FICCI secretary general Amit Mitra."

The budget does little to address concerns about rising prices, even though the finance minister acknowledged that inflation was a risk.

The biggest takeaway from the budget was a Rs 60,000-crore debt relief package, which seeks a complete waiver of bank loans taken by small and marginal farmers and a 25 per cent write-off on outstanding loans of other farmers.

"The country is discharging a deep debt and sense of gratitude to farmers," Chidambaram said, as he announced the package that won applause from leftist allies.

The scheme will be implemented by end of June, just as farmers are getting ready for the kharif crop, with general elections months possibly only months away. The dole-outs go beyond debt relief.

Chidambaram increased allocation for education and health by 20 per cent and 15 per cent respectively, pledged a 50 per cent wage hike for an estimated 18 lakh anganwadi workers and helpers, proposed a new health insurance plan for workers in the unorganized sector, and offered fiscal aid aimed at minority communities, including a five-year Rs 3,780-crore multi-sectoral development plan.

He also provided more money for the UPA government's flagship rural programmes, including the National Rural Employment Guarantee Scheme.

The emphasis on social sectors might make many stakeholders in the UPA government happy, but the caveat is that the finance minister can only allocate money while programme execution rests with states, many of which have a poor implementation record.