Monday, March 8, 2010

Prof. Shrinivas R. Patil, Hubli

Leading to higher Inflation
The budget 2010 is really good for some people like farmers and middle class people. Mr. Pranab has increased the income tax slabs instead of increasing the minimum exemption limit as it was Rs.1,60,000 in the last year. The amount of Rs.1,60,000 would have been increased to at least Rs.2,50,000 as the income level of common man is increased. Two things I wish to say here, 1) Extending the waiving of farmers loan seems eyeing on election, but the negative impact leads to higher inflation as the availability of cash liquidity will be widened. 2) Inflation for the month February crossed already 8%, if further petrol price and excise duty is increased, then rest of the dependent commodities price will also increase. Of course it is inevitable to increase the petrol price as the oil companies are incurring loss on this front, but he would have generated the other revenue sources to compensate this corner. Once the inflation starts increasing the RBI intervenes to control the inflation by increasing the bank rates, so it impacts the whole economy adversely. Ultimately the budget 2010 is burden on poor people who are already suffering the price heat.

Prof. Shrinivas R. Patil
Professor of Finance
KLES’s IMSR
Hubli (Karnataka)
Email id: shriji.patil@gmail.com
Cell No: 9900409419

Rajesh Srivastava,Chairman, Rabo Equity Advisors

I can only compliment the Finance Minister for producing an excellent budget! The risk he took last year has proved well calibrated as fiscal deficit is restricted to 6.9% in FY10 and predicted at 5.5% in FY11. It is no mean achievement in the wake of the stimulus and huge certain concessionary schemes. I am specially enthused by his eye for detail. Items which may look trivial, actually are well researched for a long term positive impact. Though miniscule, allocation of Rs 200 crores for Climate Resilient Agricultural Programme or allowing 5 more Mega Food Parks are representative examples. The allocation of Rs 66100 crores to rural development and Rs 25000 crores for developing rural infrastructure are music to my ears. His proposal to increase subvention from 1% to 2% for timely repayment of crop loans is a very positive step towards creating a good credit culture as he is not rewarding the defaulters. Yet another perfectly timed proposal is to augment the assistance to Regional Rural Banks since efficient and transparent credit delivery is as important to the agricultural sector as any other tool and RRBs are one of the strongest channel. I am also impressed by his attention to the basic social infrastructure and allocation of Rs 3675 crores for primary education at rural level and a total social sector spending of Rs 1,37,000 crores are very focussed steps. Likewise higher allocation for Micro Finance Development and Equity Fund is introspective. Finally, the bold announcement of opening up of banking sector to NBFCs and private players and doubling the disinvestment target to Rs 50,000 crores, not to mention Rs 1,73,000 crores for infrastructure deserves accolades from all quarters. And I am not even talking here of individual tax payers being happier!

Rajesh Srivastava, Chairman, Rabo Equity Advisors

D. Subramaniam

The economy needed priority focuses on containing ‘fiscal deficit’ and ‘inflation’ and sustain growth. While the Finance Minister‘s budget proposal have mainly focused in addressing the fiscal deficit by bringing it down to 5.5%, the steps taken to address inflation do not seem to be adequate.
While increasing the price of petrol is understandable, diesel could have been spared. Now with sourcing of new gas finds an LPG cylinder of smaller capacity could have been introduced which could have been priced in a such a way that it is affordable and yet without much of subsidy.
The inflation is mainly fueled by food items and FMs budget proposals in agriculture seem to be very inadequate. The total credit flow target of Rs 3,75,000 Cr (an increase of Rs 50,000 Cr) is just seem to be not enough when the entire country’s problem are revolving around Agriculture. The focus on food security is not addressed especially when there is monsoon failure and abnormal price increases noticed in dhal varieties and sugar and mounting food import bills due to high global prices.
Also the budget has not initiated any reforms in PDS as IT could have played a major role in monitoring the availability of stocks of food items distributed through PDS. A national level grid could have helped in planning and positioning of items and also for replenishing the stocks when needed. The unique identity card, ration cards, identification of people BPL etc could have been addressed under the grid with a decent budget allocation.

D.Subramaniam
Address: Door No 4,First Floor,15 A,Rathinammal street, Kodambakkam,Chennai-600 024
Bangalore cell: (0)9841510270
email : dsmaniam.xime@gmail.com

B. G Vyas, President, RAK Ceramics

The overall budget gives both sigh of relief and enthusiasm for further growth. Honourable Finance Minister has given a huge boost to infrastructure sector which will in turn give us enhanced possibilities of market expansion. With FD investments made simpler and considerable reduction in fuel cost, our extension plans will see an early swift & at the same time the cost of production will be substantially condensed. With GDP expected to grow at 9% we see huge potential in the Indian market as enhanced living standard will turn consumers towards quality products and services.

B. G Vyas, President, RAK Ceramics

Mr. Pradeep Jain, Chairman, PDL

I personally feel that today’s budget was for aam-admi, it is good for each and every individual in the society, the budget is supportive for the tax payers as the extension of limit will help in reducing burden on individual tax payers. I am sure that the budget tabled today will induce renewed sense of optimism over the country's growth. Adding further, Mr. Jain, said, that, “The budget is good for all public in general and for infrastructure sector, food processing units and the large support to the rural development including PPP projects, education and health etc. In other words, the budget is good for each and every individual and all the sectors. But the developers have looked forward to more sops to bring housing affordable for all the sectors of the society, however, we welcome hon’ble finance minister’s move of provision of Rs 700 crore and extension of interest subvention scheme of 1% on all individual housing loans upto Rs 10 lakh for units costing upto Rs 20 lakh till March 30, 2011. The scheme recognizes that cut in interest rates has an important role to play in reducing EMIs of borrowers & creating additional demand for low cost housing. We are of the view that it will encourage and prompt the developers to give more importance to projects which will cost upto Rs 20 lakh. However, it would have been more fruitful for the buyers and developers had the limit been increased from units costing upto Rs 20 lakh to units costing upto Rs 30 lakh” “Hon’ble finance minister’s further support to the real estate sector to continue to get the benefit under 80IB(10) on the ongoing affordable housing projects which were earlier required to be completed in 4 years from the date of sanction are now allowed to be completed in five years. This indeed is a direct support to the sector as during the slowdown some projects did get delay but now the developers will continue to get the tax benefit in affordable housing projects under section 80 IB (10),

T.V. JAYAPRAKASH

Increase in transportation fares will lead to vicious cycle of inflation
Threat of bus fare increase due to enhanced fuel prices is a permanent head ache for the common man. This will lead to a vicious cycle of inflation too. Consideration for the welfare of women and children is a healthy trend. Aim of urban development and slum clearance will pave way for growth. Development of rural and urban infrastructure with an expansion of 20 km highway per day is a positive phenomenon. It is seen that development of highways directly and indirectly helps the rural farmers. A decreasing trend in budget deficit of 6.9 per cent in 2009 - 10, 4.8 per cent in 2011 - 12 and 4.1 per cent in 2012 - 13 is good. Privatisation of insurance and increasing monopolies will widen the gap between the haves and have nots.
T.V. JAYAPRAKASH, MA(Eco), MA(Socio), MCJ,

Vice Principal, MES Women's College, PALAKKAD.Research Officer (Rtd), Directorate of Economics and Statistics, Government of Kerala.

S. RAGHUNATHA PRABHU

Sir, No attempt is being made in the Budget to bring back black money of Indians held in Swiss banks whichis around $ 1456 billion ( about Rs.7,00,000 crore ).Instead of hiking the excise duty on petroleum products,the FM could have taken steps to bring back black money to mobilise more resources. He could have announced an amnesty scheme and shared the inflow of black money between the Govt and the black moneyholders on a 50 : 50 basis.The Govt. lacks political will and doesn't worry about the mounting fiscal deficit.

S. RAGHUNATHA PRABHU

V.Pasupathi, Erode

SECTION 44 AB
Section 44 AB was introduced in Finance Act 1984, presented by Hon’ble Finance Minister,sri.Pranab Mukherjee. Business turnovers of Rs.40 lakhs and above and professional receipts of Rs.10 lakhs and above are required to be audited by a chartered accountant. By insertion of this section power was conferred on chartered accountants to do tax audit.Audited accounts did not enjoy any statutory concessions either in assessment or at survey / searches by Incometax Department. Courts interpreted section 44AB holding that,” The Object of section 44AB of I.T.Act is to prevent tax evasion, plug loopholes enabling tax avoidance and unearth blackmoney”. In re Thanavur silk handloom weavers co.op production and sales society Ltd. [ 2003(263) ITR.Page334)] The rare judgement of High Court of Uttarkhand , [2008(300)ITR P.435] has viewed that the plenary powers of the assessing officer are not conditioned by an audit report.
History repeats!!! The recent finance bill seeks to raise this limit to Rs.60 lakhs for business and Rs.15 lakhs for professionals. Prices and costs of services have spiraled up many times since 1984.The proposed raise in limits seems to be inadequate and only cosmetic.The limits may be raised to 1 crore for business and Rs.25 lakhs for professionals.

v.pasupathi
advocate,
25,periyar street,
erode 638 001
phone: 0424-2212707

K.V.A. Iyer

It is indeed a visionary budget. Goals have been precisely set. Means are vaguely stated. Specific resource in or out of budget is not identified. Let us see how food price inflation is dealt in the Budget 2010. Increased food supply is identified as solution. The means to manage supply and demand have been stated. To increase yield from farm, the means stated are R & D for farm research; Incentive directly to farmers; assured support price and facility of crop insurance. To manage demand the stated means are targeting subsidy to the needy to buy food by expediting UID project. Considering prevalence of small and marginal farm holdings in the country; density of population; constraints on fresh water resource and pollution concern associated with agriculture, the measures announced in the Budget 2010 are totally inadequate to improve supply immediately. Globalisation can also be used as tool to supplement food supply. Instead of the Government acting as tools for domestic capitalists to realise their global ambitions such as acquiring foreign telecom companies, the domestic capitalists may be encouraged to do commercial farming in vast tracts of land in Brazil and Argentina for getting assured food supplies. India’s clout in G 77 or G 21 Grouping could be used to build this mutually beneficial relationship considering that these Latin American countries face hurdles to export farm products to Europe. It is not that Indian farmers are to be neglected. They deserve encouragement on par with Petroleum prospecting companies in India that enjoy price parity with international price for petroleum crude. Similarly support price for farm crops in India can as well be the prevailing support price in Europe and the U.S. To manage demand, UID project would be a great enabling tool. The project announced last year should have been completed by now. Yet the Finance Minister has now allocated a meagre sum of Rs 1900 crores for the project that may cost about Rs 6000 crores at an estimated Rs 50 per head for each UID for 120 crores of population.
K.V.A. Iyer

Tel: +91 484 2331922

Cell: +91-98471 31136

Email: krpm12000@yahoo.co.uk

Dr S S Sangwan

Comments on Union Budget 2010-11 by Dr S S Sangwan
Inflation not Addressed
The Government has accepted inflation especially the double digit food inflation as a major concern but it has not been addressed as one of the main focus in the contours of the budget. Government has not focused the food grains and sugar supply management which in mess due to vested decisions of agriculture and food
Inclusive Development
The inclusive development has been adequately addressed in the budget through higher allocation for school education, health, NREGA, Indira AWAS Yozna, Shahari Rozgar yozna, skill development programmes, backward region grant, pension scheme for unorganized sectors, etc.
Women and other weaker sections development is covered by increasing allocation for ICDS, Shaaksar Bharat programmes for literacy of women, Ministry of Social welfare and justice, Ministry of Minority Affairs, etc.
Financial inclusion has also been taken care of by policy to bringing in new banks by RBI, augmenting the Financial Inclusion and Financial Technology Inclusion Funds, Micro-Finance Development and Equity Fund' and capital support to RRBs and weak
Agricultural Growth
Food processing has been well addressed especially in view of type of products demanded in the big malls and retail shops. The various concessions custom and excise duties and external commercial borrowings for the machinery and equipments for cold storage, cool houses, supply chains, refrigerated vans, etc is a desired step to compete with such imported food items.
However, adequate emphasis is lacking in increasing food production. The allocation of Rs400 crore for Eastern states of Bihar, Orissa, West Bengal, Chhattisgarh, Eastern UP is more of politics than economics when the programmes have not been specified. It is well known fact that the food situations of India depend upon production in North and Central India.
It seems the Agriculture credit has become a panacea for agricultural production in the last decade or so. If a known persons peeps into the credit target of Rs 375000 crore, it will be eye wash as the real flow of credit may be much less than it . Govt may be very well knowing the actual flow from the amount of interest subvention given each year. The last decade of (high) growth in agricultural credit has almost no correlation with the (least) growth in agricultural production(physical). The various interest subventions on the rate and repayment incentive do facilitate but the remedy of agricultural production lies somewhere else.
Supply of quality seeds and sapling are the basics for increasing production, ceteris peribus, therefore, a nation wide policy of supplying improved seeds and seedlings at concessional rate especially to farmers upto 2 ha may be a large programe at par with the credit. It will take 3 years to be realized and now it is time for the government to start even ripe the political harvest after 3 years. Let all agricultural programmes aim to set nursery and seed farms and provide related extension service.
In the long run the issues of unviable holding and some farm of corporate farming can be overlooked
Mobilization of Resources
The budget has proposed to mobilize net Rs 20,500 crore for the year. Of this 36 % from withdrawal of custom duty concessions, 29% from 2% increase in excise duties which were a given as stimulus package in recession, 17% service tax with inclusion of additional services like air travel, lottery, executive health check up, marriage halls, film copy rights, tutorial coaching, commercial property booking etc., 18 % from corporate tax while losing 3 % in individual tax and remaining 3 from others.
The resource mobilization efforts appears to be rational and progressive except the retrogressive tax concession to higher income groups and increase of basic duty of 5% on crude petroleum; 7.5% on diesel and petrol and 10% on other refined products is restored and imposed Rs 1 per lit the Central Excise duty on petrol and diesel. The later one will have compounding effect on inflation
Income tax concessions to higher income groups only
The income tax benefits shall accrue to those in the income slab of Rs 3 lakh or more. The vast majority of those below this slab especially the pensioners, low salary employees shall left out of any of the concession
Even the full benefits of one lakh saving and additional Rs20000 for LT bonds will be availed by the higher income groups.
The prevailing rates of interest on saving instruments are also very low.
Why the government excluding retired persons in the age group of 60 to 65 from the benefits of income tax when both are in same category from income point of view.
Therefore, its is highly desirable to increase the nil income limit to Rs2 lakh and lower the income tax Sr. citizen age to 60 years.

Dr S S Sangwan drsangwan8@gmail.com

1437, Sector1, Rohtak-124001

09996804938

M.S.Vijayakumar

A BUDGET WHICH DESERVES COMMENDATION

This is a budget which addresses several conflicting interest in a well balanced and well designed way. Striking a balance among three macro economic objectives pulling the economy in different directions was the toughest job on hand for Pranab Mukerjee. Reigning the fiscal deficit, keeping the growth momentum and keeping the borrowing down , the most formidable job for any finance minister has been handled deftly by the finance minister.
It is too much to expect a finance minister to spend on a whole lot of things to ensure a robust rate of economic growth without raising the revenue for the same. Pranab Babu had a Hobson’s choice in this regard. Either he had to spend less or borrow more or resort to taxation. The right economic choice (but a politically explosive one) has been made by the FM in increasing the excise duty, the bad effects of which will be offset by the disinvestment in PSU stocks. Increase in the prices of petroleum products, a step pursued by all governments hitherto was the reliable choice before the finance minister. The inflationary effects of the same have to offset by higher production and higher growth rate.
What the finance minister has taken away in the form of higher excise duty is compensated to a little extent by leaving more money in the pockets of people by way of broadening of income tax slabs.
All credit goes to Pranab Babu in not neglecting the interest of the unorganized labour through his contributions to the new pension scheme. The agricultural sector has also drawn his attention. No wonder the entire economy including stock market has received this budget well by showing positive signs.

M.S.Vijayakumar

msvijayakumar.vijaya@gmail.com
( Principal and Professor of Economics in D.Bnumaiah’s College, Mysore and also a columnist in Prajavani, a national daily from Karnataka)