Saturday, March 17, 2012

Show me the money [76/365]

Indians are a funny bunch of cheap people.

Until a few hours before the 2012 Union budget was announced, every broker and MBA graduate worth his share price predicted that Pranab Mukherjee, the Union Finance Minister, would cave in to the temptation to deliver a populist budget especially since his party is not really going to be winning any elections any time soon. We all thought he might give us tax free salaries, no customs duties on our Merc and Beemers and that double door refrigerators and air-conditioners.

Fast forward 24 hours and we are all ranting against how Pranabda, as he is fondly called, screwed us. Now, we are definitely not going to vote you back.

But looking at the reports and reading the fine print, I was relieved. The Finance Minister does have a spine. Against all instinct to pack his budget with sops for all, he tightened the reins of an economy that was bleeding badly.
This budget was something we needed a few years ago, but better sooner than later and here's why I think the 2012 Union budget is perhaps the best budget in a very long time.
  • The tax brackets for salaried individuals has been changed slightly, the effects will be best felt by freshers starting off at the lowest ranks. I remember how I had to pay tax when I earned 10k pm a decade ago. That left me with very little to save for a rainy day. With the cost of living spiralling the way it is now, every little penny saved is a penny earned. Good stuff.
  • While direct taxes have been lowered, he has increased the indirect taxes on good and services. Which is a fantastic thing. While it is very easy to evade direct taxes like IT and PT, indirect taxes will help mop up much of the excess money that flows around while also covering more people. Case in point: The Govt of India has only about 1.8 crore tax payers in a population of billion plus.
  • With a white paper on black money, Pranabda has, in fine swipe of his calculator, created an economic measure to check the flow of black money abroad. Even assets and property owned abroad will be covered under tax (even if you are just a signatory). Nice move.
  • With customs duties and sales taxes increasing on luxury goods and services, I think he has done a masterstroke, especially since people who can afford a Merc can certainly afford to pay a lakh or more extra. With the sheer volume of illegal money that was taken abroad by people who didn't know what do with all the extra cash lying around , something had to be done.
All said and done, I wonder what all the fuss is about. Especially after we complain about the pathetic state of infrastructure, business and economy today, what we need is urgent attention and supervision. More so at a time when fiscal wisdom or the lack of it has been the downfall of entire continents.
While this is definitely not as painful as in the US or in Greece or Italy, this is definitely what we need so that we don't end up with either of them.

Overall, Pranabda has executed a extremely gutsy masterstroke in his last outing as the Union Finance Minister. Bravo!

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