E-Paper
Jaswant Singh wants you to spend more
Presenting his maiden budget, FM gave a clear signal to middle class consumers: just go out and spend.What do you feel about the Budget?
Presenting his maiden budget, Finance Minister Jaswant Singh gave a clear signal to middle class consumers: just go out and spend.
Singh gave personal tax reliefs that will leave them with extra money. At the same time, interest rates on saving schemes were slashed, in the hope that the average salary earner will save less.
Instead, Singh's budget represented a brave attempt to expand the economy by making goods cheaper. The reasoning behind the budget: cheaper goods encourage people to buy more; a demand boom leads to more investment and more jobs. And growth puts more money in people's pockets so there's even more demand.
Singh slashed excise and customs duties across the board in the hope that manufacturers would pass on the savings to consumers and offer cheaper goods.
Industry responded with ecstatic praise. CII director-general Tarun Das said: "The budget will increase the purchasing power of consumer, bringing them back to the market which would be very good for the Indian economy and industry in particular."
Said FICCI secretary general Amit Mitra: "It is a forward looking, people friendly and growth stimulating budget."
The Sensex too gave its approval, moving up 6.3 per cent.
By the evening, the impact was beginning to be felt. Car manufacturers, which benefited from a 12 per cent reduction in excise duties, were already planning price cuts.
Singh had been expected to produce a budget that would please the BJP's middle class base in an election year. To some extent, he delivered on those expectations.
While the 1 per cent cut in interest on small savings and PPF may not go down well, his budget is a bag of goodies worth Rs 3,000 crore in tax rebates, concessions and incentives.
While the salaried will have a lower tax liability, the Finance Minister has made an attempt to create a safety net for the people. While senior citizens will get tax rebates, the government plans to set up a subsidised insurance scheme and a new pension plan.
Under the plan, people over 55 have been guaranteed a 9 per cent return on their retirement funds parked with the Life Insurance Corporation.
The cut in duties on import of medical equipment, and benefits for private hospitals are directed at improving the country's healthcare system.
Jaswant Singh has tried to keep corporates on the right side of the ruling alliance with a slew of custom and excise duty cuts.
One area which could turn out to be politically unpalatable is the increase in fertiliser prices, especially in a drought year.
That and the 50 paise cess on diesel could raise the hackles of the farm lobby.
The BJP and its allies have already called for a rollback of fertiliser price hikes.
Amid all the cuts and slashes, one sector that faces a hike in taxes is the service industry. Service tax has been raised to 8 per cent from 5 per cent. But then the sector is among the growth leaders of the Indian economy.
