Remarks by Prof. S.K. Kaushik on Panel Discussion of Union Budget 2011-2012 at the Consulate General of India on 28.02.2011
Budget is by its very nature a very complex document representing government policy on the economy, its fiscal affairs, allocation of resources between today and tomorrow and specific relative importance of various sectors and activities.
All of it could be divided into three areas: revenue, expenditures and policies in the domestic and external sectors of the economy.
On the revenue side the Finance Minister has continued highest importance given to reduction in income tax and slight increase in indirect taxes. The direct tax policy, a continuation of reforms that began in 1991, continues to be used to encourage income generation.
The overall burden of income tax is almost nil on lower incomes and a maximum of 30 percent on the upper incomes.
India’s income tax rates are among the lowest in the world and they make India very competitive on that variable.
It is also redistribution in that the low income and the older persons do not pay much while overall India takes in less than 11 percent of GDP in taxes.
Income taxes contribute something like 4 percentage points of the 11 percent.
Indirect taxes are slightly increased to tax people at the consumption level slightly more. No one can escape the excise and sales taxes so while it is slightly regressive the low income have the income and government subsidies to be able to pay these taxes. This approach makes the overall tax system a generally fairer one.
The government is also trying to have a better mix of tax revenue from income, corporate, sales, excise and customs duties within its 11 percent or so of tax to GDP ratio.
On the expenditure side the budget underscores the importance given to infrastructure investment, employment guarantee scheme as an income support scheme, agriculture, education, financial institutions, etc. Mechanisms like banks and micro finance schemes are also strengthened.
The industrial policy remains in place without change so the excise duties remain as before. Corporate income tax, capital gains tax and dividend tax rates remain low and aggressively competitive in the world.
External financing, especially ownership of mutual funds is enhanced, with the expectation of increased portfolio investments by FIIs and others.
On FDI we are told that discussions are underway to further liberalize the FDI policy.
All together it is a balanced approach budget with a little bit for every sector and segment of the economy as continuation of current government policies.
Economists used to discuss balanced and imbalanced economic growth. This budget is an example of a balanced economic growth model.
No comments:
Post a Comment