At
the end of the day,people at large were relieved that
at least current budget didn't make their life any worse if not better.
“Much ado about nothing”. This is what Union
Budget 2013 was all about. Budget trouble might have passed for PC but it has
gone to an extreme level for the people of the country. Budget completely
disregarded what an aam aadami expected from it. No matter what happens
with fiscal deficit or GDP, rising cost of living, something which common men
are most concerned with, certainly not going to recede. FM in no ways makes it any easy for the
people putting up with plummeting inflation against their steady income. Following
are the issues which needed an immediate consideration on the part of him. Some
of them did receive his attention yet core problems related to those were completely left
unaddressed.
Real
Estate:
With
the intent of providing affordable housing, FM proposed a 2.5 lakh deduction on
the total taxable income on home loans less than 25 lakh. As if he doesn’t know
that finding a home on that price in itself is a herculean task in Indian
cities. Apart from this, first time home buyers can now get up to rs. 5.5 lakh
of income exempted from tax. Again the point is will they even get a low cost
home given the present scenario of skyrocketing property prices.
Indian realty sector is faced with multi
faceted regulatory challenge. On one hand the sector is tainted with the
circulation of black money on the other genuine buyers are bereft with
affordable housing. Nexus between people sitting on wads of cash and avaricious
dealers has made it a nightmare for a middle class house hunter to even dream
of a dream house.
FM
would have done well had he announced for a Real Estate National Regulator, as
earlier stated, who could maintain transparency and provide real picture of
demand and supply in the realty market. FM must be aware of the fact that it is
affordable abode not some scant relief on home-loan interest payments what a
middle income earner expects for.
Savings
against inflation:
Acknowledging
the people’s lure for gold and decreasing rate of savings in financial instruments,
FM has proposed for tax free bonds in Infrastructure sector and also increased
the gross income level to 12 lakh from earlier 10 lakh for investing in Rajiv
Gandhi Equity Savings Scheme (RGESS). However, it is dubious whether these meager
steps towards fighting gold lure will be of any avail.
FM
has also proposed the idea of launching Inflation Indexed Bonds with the consultation
of RBI in order to lessen the gold demand. IIBs are those bonds overall return
on which is adjusted with increasing inflation. Given that India has several inflation
measuring indices, ranging from Wholesale to retail Inflation, it is still not
clear which one would be used for pegging return on IIB. Whatever be the index
parameter IIBs can never yield the same benefit as gold does. It would have
been better had he proposed to instead launch gold index bonds, returns on
which could be adjusted with floating gold prices. IIBs including other
proposed savings alternatives will certainly fail to catch people’s attention
against their penchant for gold.
Urbanization:
India
is fast urbanizing. Its urban population would grow from 340 million in 2008 to
590 million by 2030 (according to a 2010 Mc Kinsey & Company report.) It is
unfortunate that an efficient FM like Chidambaram failed to provide a
farsighted vision to make Indian cities accommodate this huge influx of
population. Apart from doubling the fund allocation to Jawaharlal Nehru
National Urban Renewal Mission (JNNURM) -- the UPA government's flagship urban
modernization program, there were no critical steps towards making India
urbanized in planned manner, a much-needed effort on the part of Govt. in the
present time.
Tax reforms:
Keeping
in mind the next year general election, FM left the personal income tax slabs
unchanged and apart from this he has given 2000 rs tax credit to people earning
between 2-5 lakh. However, he levied 10% surcharge on people earning more than
1 cr who are just 42800 in number. It is beyond understanding how the surcharge
on this meager number of riches will generate enough revenue to swell Govt.
exchequer.
It
is time that major tax reforms are incorporated in India. Current range of taxation
was last revised more than a decade ago in 1997 when people earning close to
fifteen lakh used to be considered among top slot of income holders. Now annual
income of a good chunk of Indian population has gone up to 40-50 lacs. It
is irrational that people earning 15 lakh and someone who earns just double of
that is taxed at the same rate. FM should have dared to make changes in the
marginal tax rates for much needed tax reforms.
Conclusion:
All
in all Union Budget 2013-14 was a huge disappointment. It was a formality, an
attempt on the part of FM to play the game safe with one eye on voter and other
on foreign investors and rating agencies. This budget had nothing to offer for
which FM had to wait for this auspicious annual economic event. At the end of
the day, despite huge expectations, people at large were relieved that at least
it didn’t make their life any worse if not better.
