Kudos for resisting the populist urge, Mr FM
By By Vallabh Bhansali | 01 Jan 1900
At
a time when the political winds had become difficult
for the FM, he has held his ground and not yielded by
bringing in populist measures.
He has continued with low-key reforms such as phasing
out central sales tax, permitting short selling and
stock lending. Important decisions have been buying
out State Bank of India''s stake from Reserve Bank of
India at 20-per cent premium to market price and continuing
with textile upgradation fund.
These have of course not been adequate considering that
this was the last budget where reform measures could
have been bought in and that damage to sentiment of
growth has been greater as actually stock prices have
fallen disproportionately than the dent in fundamentals.
The
actual impact of tax measures such as increase in excise
duty on cement or taxing IT companies is going to be
only marginal. Cement companies make handsome profits
and in all likelihood will lose from the burden. And
IT companies already pay 8 per cent to 14 per cent local
and foreign income tax and hit to the bottom line will
therefore not be more than 3 per cent to 5 per cent
depending on how much credit they will get for the taxes
paid abroad.
Dividend
distribution tax increase will hurt but not kill. If
things stabilize next year you could see roll back and
also drop in tax surcharge.
But
look at the upsides. The country''s fiscal position has
consolidated and we can look forward to controlled fiscal
deficits at the centre and the state. The markets and
the economy do not need much and we should learn to
go ahead as big boys that we are.