Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: cpt :: VAT Audit :: ARTICLES ON INPUT TAX CREDIT IN VAT :: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARD :: articles on VAT and GST in India :: due date for vat payment :: Central Excise rule to resale the machines to a new company :: TDS :: empanelment :: VAT RATES :: form 3cd :: ACCOUNTING STANDARDS :: list of goods taxed at 4%
 
 
« Budget Extravaganza »
 With demonetisation inducing tax compliance will PM Modi cut tax rates in Budget 2017?
 State plan budget utilisation in Odisha
 Maharashtra wants budget advanced to February
 Coastal economic zones may get 10-year tax exemption in next Budget
 Why advancing the Union Budget date may not make much difference
 Govt keen 2017-18 budget should not clash with polls: Arun Jaitley
 Finance Ministry seeks industry suggestions on taxation for Budget
 Budget should focus on fiscal firm up
 Finance ministry keen to present Budget on February 2 or earlier
 Poor railway performance may mar merged Budget
 Cabinet’s formal nod to be sought for Budget on Feb. 1

Budget 2011-12: Six decisions finance minister could take
February, 19th 2011

Finance Minister will try to ease inflation-hit voters' pain with a budget heavy on spending for food, fuel and fertiliser subsidies, while selectively lifting taxes to meet fiscal targets.

Pranab Mukherjee, faces a tough time reining in inflation while keeping the economy on a high-growth path when he presents his annual budget for 2011/12 in parliament on Feb. 28.

Last year, government rolled back about $10 billion of a $40 billion stimulus package implemented during the 2008 global financial crisis.

This year, the government is unlikely to make tough belt-tightening decisions. It is on the back foot over corruption scandals and faces elections in four major states.

Stubbornly sticky inflation in Asia's third largest economy, driven by food and other commodity prices, combined with a high fiscal deficit has prompted repeated calls from the central bank for fiscal consolidation.

However, government tends to bank on higher revenues rather than spending cuts, a formula that worked in the current fiscal year thanks to a windfall from the sale of 3G mobile bandwidth.

Below are some questions and possible answers that the finance minister faces over the budget:

WILL INDIA FURTHER TRIM FISCAL STIMULUS?

Since Mukherjee wants to reduce the fiscal deficit to 4.8 percent of gross domestic product in 2011/12 and 4.1 percent in 2012/13, he is expected to continue a gradual rollback of the fiscal stimulus package unveiled during 2008 global crisis.

In last year's budget, he trimmed the package by raising factory gate duties on all major items to 10 percent from 8 percent and reimposing the taxes on crude oil, petrol and diesel that were withdrawn in 2008.

The government rolled out its stimulus package in three phases during 2008 and 2009 by cutting taxes and lifting spending on infrastructure to prop up demand.

Meanwhile, an effort to overhaul India's tax system has been deferred until next year, meaning Mukherjee may hold off on raising tax rates across the board and instead lift rates only for goods such as cars and commercial vehicles, while bringing more services into the tax net.

WILL INDIA FOLLOW THE FISCAL CONSOLIDATION PATH?

Partially. Mukherjee could rely on a surge in domestic demand and global recovery to drive tax receipts to meet fiscal targets.

The RBI, which has raised rates seven times since March to tackle high inflation, hopes the government moves towards fiscal consolidation in 2011/12.

The finance minister may also marginally lower government borrowings below this year's Rs 4.47 trillion ($98 billion) to show his commitment to fiscal consolidation, though he will not have the cushion of revenue from the 3G spectrum auction in the new year.

The government could raise up to Rs 40,000 crore from the sale of stakes in companies, partially offsetting a swelling food subsidy bill estimated at Rs 70,000 crore. A downturn in the stock market, however, has curbed investor appetite for new issues for the time being.

WHAT ARE THE OPTIONS ON OIL SUBSIDIES AND DUTIES?

The widening gap between international crude prices, now over $100 a barrel, and domestic retail prices of diesel, cooking gas and kerosene, could force Mukherjee to slash levies on imported crude and domestic petroleum products.

High inflation and upcoming state elections mean Mukherjee will not pass along the full impact of rising crude prices.

The oil ministry has urged Mukherjee to eliminate the 5 percent customs duty on crude and reduce duties on petrol and diesel to 2.5 per cent from 7.5 per cent.

HOW CAN INDIA CURB INFLATION WITHOUT HURTING GROWTH?

This is a major challenge. India wants its economy to grow at 9 percent in 2011/12, up from about 8.5 percent this fiscal year, even as inflation remains well above government targets, at 8.23 percent in January.

More infrastructure would help ease bottlenecks. The Planning Commission, a government body, has recommended an increase of up to 20 percent from last year's $38 billion budgeted for sectors including roads, ports, airports and railways, as well as for health and education.

Mukherjee may direct funds towards more production of milk, poultry, fish, vegetables and fruit, which have driven food inflation running at 11 percent annually.

WILL THE FINMIN ANNOUNCE MAJOR REFORMS?

Probably not. The government is focused on blunting opposition attacks over a series of corruption scandals and may announce a JPC into the huge 2G spectrum scandal. At this time, it is unlikely to try anything controversial.

Mukherjee will therefore probably not announce any major economic reforms such as opening the retail sector more broadly to foreign investors or raising foreign investment limits in insurance, although some reforms may be announced later.

He may, however, announce the set-up of an infrastructure debt fund and initiatives to deepen the corporate debt market.

WILL THERE BE ANY STEPS TO ADDRESS THE CURRENT ACCOUNT GAP?

The finance minister and central bank have expressed concern over the high current account deficit and the reliance on fickle short-term portfolio inflows to fund it.

More exports are needed, and the budget may include incentives for labour-intense export sectors such as textile, leather and wood products.

The current account deficit is on track to touch 3.5 percent of gross domestic product this fiscal year, which the central bank governor has said is unsustainable.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Publishing Management System PMS News Management System Publishing Management System Development Online News Management System for media company custom Publishing management system development Survey management system Market Res

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions