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The Budget is a fine balance of agriculture and development

The FM has signaled increased investments in the agriculture, infrastructure and education sectors, writes Kris Gopalakrishnan.
None | By Kris Gopalakrishnan
UPDATED ON MAR 02, 2008 10:02 PM IST

As one of the few trillion dollar economies in the world, India is firmly on a growth path. The economic growth has been further bolstered by the enhanced collection of tax revenues.

The finance minister has signaled increased investments in the agriculture, infrastructure and education sectors. This is a welcome step that balances the expectations of the agricultural sector as well as those of the industry.

On the agricultural front, the loan waiver measures announced by the finance minister are welcome. This scheme will benefit the small farmer from the burden of debt besides allowing banks to clean up their balance sheets and thereby increase lending.

The Finance Minister has been generous on the personal taxation front.

He has also made some bold moves on the indirect tax regime. While the former ensures that individuals earning up to Rs 5 lakh can save Rs 44,000 per annum, the latter has brought much cheer in the form of the overall tax rate reduction from 16 per cent to 14 per cent. This brings much cheer to the Indian middle class and will certain help better tax collections.

For the IT Industry though, the Budget has been a bit of a dampener. The industry had hoped for an extension of the tax holiday scheme for smaller companies to be extended, as the sharp rise in the rupee, has impacted the smaller companies in the IT and BPO sectors. The Finance Minister has disappointed the smaller companies by not revisiting the sunset clause.

Similarly, industry expected this Budget to bring positive news on the Fringe Benefit Tax (FBT) front.

There is a further sense of disappointment that customised software sold locally would come under the service tax net of 12 per cent with taxes on packaged software going up to 12 per cent.

One had expected that packaged software would not carry this tax since a lot of educational material is in the form of software packages and this will have a retrograde effect.Overall, the Budget can be rated as a good one that will provide the country with the much-needed impetus to grow.

(Kris Gopalakrishnan is the CEO and MD, Infosys)

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