RTTNews - The 'aam aadmi' budget unveiled by finance minister Pranab Mukherjee on Monday received mixed reaction from analysts and economists as a 'missed opportunity' but it certainly scored well with students, housewives, self-employed professionals and salaried individuals after the budget outlined plans to spend more on food subsidies, rural jobs, roads and power and tax relief, if survey reports released on Wednesday are to be believed. Like his February's interim budget, Mukherjee's budget would probably turn out to be better after quite some time.
While the finance minister failed to live up to market expectations, especially with regard to key issues like the revamp of fuel policy, reduction in corporate tax, the disinvestment road-map, aggressiveness on reforms and policies on foreign direct investment, analysts agree that the intentions of the budget were good and the inclusive nature of the budget would support faster economic growth in a shorter span of time.
Due to the nature of markets, investors went euphoric in the run-up to the budget after Prime Minister Manmohan Singh won a resounding re-election in May, reducing his dependence on allies such as the Left parties who opposed crucial reforms during his first term.
The expectations got a further fillip after the economic survey placed before parliament days before the presentation of the Union Budget, recommended Big bang economic reforms. As investor expectations were unreasonably high, the stock market gave a huge thumbs down, ignoring the positive aspects of the budget. They have ignored the fact that reforms are not events, but a continuous process, which the government is committed to fulfill.
Despite constraints on fiscal deficit, Mukherjee maintained status quo on excise duty cuts or reduction of service tax charges. The finance minister reiterated his government's commitment towards the implementation of the goods and services tax (GST) by April 2010 even if some states failed to come on board by then.
He abolished the commodities transaction tax, unveiled direct subsidies for farmers, extended deduction in respect of export profits by one more year and increased spending on agriculture and the infrastructure sector while doing a tight rope walk in the most trying circumstances.
While the increase in the minimum alternate tax to 15% from 10% will affect only a few companies, the removal of fringe benefit tax will remove a huge irritant for the entire corporate sector. Above all, the focus on rural economy is a positive aspect for many companies, especially those in the financial, FMCG, telecom or automobile sectors.
In a meeting with industry leaders on Tuesday, Mukherjee said that the widest budget deficit in 16 years will be a risk worth taking, given the need to support growth amid indications that the global recession will continue this year. On criticism that the budget hasn't laid a detailed road map on disinvestment in state-run companies, the finance minister said that it will be done at an opportune time.
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