Post presentation of the budget, the stock markets crashed by over 150 points today, because perhaps they reacted negatively to the 10% tax proposed on dividends earning on Rs 10 lakhs and above per year, and secondly, they were perhaps not convinced of our ability to maintain the fiscal deficit at mandated level of 3.5% of the GDP.
But after hearing the MoS Jayant Sinha's explanation behind the confidence of maintaining this figure, I am convinced that this figure of 3.5% is not too ambitious.
I am not surprised that today, the stock markets have rebounded sharply once the fine print became clear to everyone. Yes, coming to the proposed 10% tax on dividends, it is only fair that super rich contribute more generously to the exchequer, and 10% is not a heavy dose of tax.
Focus on rural sector reforms primarily through 100% FDI in food processing, major thrust on infrastructure mainly through roads and railways outlay of over 2 lakh crores, encouraging voluntary disclosure of unaccounted wealth, and low cost housing have been among the key pluses in this budget.
Being a student of Economics, all I can say that this budget aims at process reforms within our system within the constraints imposed by the global scenario, political considerations, and the crying need to boost the rural economy. It is not aimed at effecting massive liberalization a la 1991 budget, presented by the then FM Dr. Manmohan Singh.
Yes, as suggested by Mr. Swaminthan Aiyar in Times of India two weeks ago, wish the FM had imposed heavy custom duty on beedis as well, besides legalizing betting on cricket matches and taxing the same. When betting on horse racing is legal, why can't betting on cricket?
The million dollar question of what this budget has for the key segment of our society, the middle class? Well, apart from the hike in rental allowance and the major thrust in the low cost housing, the only thing which our middle class can look forward to is a highly improved macro environment which offers promising and stable job opportunities to the educated lot, besides a highly conducive environment for those desirous of fulfilling their entrepreneurial ambitions.
All said and done, the devil would now lie in - effective execution of the various provisions in the budget, favorable monsoons this time, global crude prices, and above all stability and improvement in the highly fragile global environment.
