Tax evasion being rampant in india, making it a criminal offence with the strictest terms for the culprits involved.
the budget is prepared in given investment and trade climate. while the investment continued to be slow, there is a need to pick up demand through rationalisation of interest rates, for which fiscal deficit has to reduce. the only commitment to bring down the fiscal deficit can work in tight investment environment, as private companies can leverage the cost of their produce.
Thanks for sacrificing some of your time to watch and write about this budget. It could be argued that a good budget must be so boring that it is forgotten by the same evening. By that reckoning, Chidambaram has delivered a mind-numbingly amazing budget.
Chidambaram acquits himself honorably from another viewpoint too. In comparison with the recent budgets of developed and developing countries around the world, his financial plan stings less. Most governments are raising taxes abnormally, cutting welfare allocations and eliminating incentives and subsidies. Chidambaram has by and large maintained the status quo. So he shines in comparison with other (disastrous) finance ministers.
Still, I think Chidambaram failed today. First, he has adopted the position that India's growth slowdown is part of a global phenomenon and he will wait until the cycle turns up and the growth returns on its own. That is sheer defeatism. If I know my Chidambaram well enough, he has never failed to take credit for buoyancy in the economy, markets and investment inflows. After all that, now to abdicate your responsibility to make things happen and spur growth is a crime.
He should have unveiled big-bang measures to encourage private investment and entrepreneurship as a means of getting out of this rut. We are near the low of an investment cycle and will stay there until such external boost is given.
I can understand his logic for why he didn't give big tax breaks. It is not just that the government can't afford it, but also that it could foil its attempts to control inflation. However, there is a bit of dishonesty there. His decision to increase the government's borrowing to a record level, and far beyond the estimates of economists, contrasts darkly with his denial of the same inflation-busting increases to household budgets.
Just one sample of a long-term issue he could have tackled: India's government has one of the world's lowest productivity. With four million central government employees and five million public-sector staff, the Indian State is a bloated creature. He could have thought of measures to slim down the government and increase per capita productivity. The resultant savings could have been passed on to the economy. He hasn't ventured anywhere near such a path.
Chidambaram's decision (yet again) to keep fattening the government with more borrowing and taxes is a politically expedient one. His hands aren't tied as he makes it out to be.
Chidambaram's economic philosophy is to be loyal to the government's cause (get more money for the State). His thirst for increasing taxes is all too well known. There would be nothing wrong with it if he matches such a strategy with an aggressive push to find growth avenues too.
In this instance, he has proved to be timid. The man who thought up things such as Exim Scrips, the Minimum Alternate Tax and the 10-20-30 formula seems to have run out of creativity. He has become jaded and cautious.
In other words, for those of us who have closely followed Chidambaram's career for more than two decades, he is a promise not kept. Time to look for the Next Chidambaram.