Thursday, February 28, 2008

Chak De Budget

Railway Minister Lalu Prasad wanted every child to say "Chak de Railways." Will Chidambaram, too, follow suit by presenting a "Chak de Budget?"
Lalu could afford to say "Chak de" because the Railways has been faring well, adding to its profits year after year. But can Chidambaram have that luxury?
Prices of essential commodities are rising, unemployment is mounting and agrarian crisis is aggravating leading to farmers’ suicides. Besides, global as well as domestic economies (including corporate earnings) are heading for a slowdown. Therefore, to address the issues concerning the "aam aadmi" and to sustain the present momentum of 8-9 per cent economic growth, Chidambaram, unlike more comfortably placed Lalu, will have to take some unpopular measures which may not be in the best interst of political expediency.

But if lalu has stolen the show by presenting a please-all Budget, can Chidambaram be far behind? By giving in to the compulsions of an election year, PC may avoid any new taxes in his Budget and offer sops by way of income tax relief and customs duty cut.

The expectations from Chidambaram are high. People look for personal and corporate income tax cuts, excise duty relief, a hike in the income-tax exemption limit, a higher ceiling for tax-saving investments, rejig in tax slabs, simplification of taxes, massive funds for social sector projects and for rural health and power sectors. Farmers expect package for debt-relief, irrigation sector and farm production.

Lalu won over women by offering sops in the form of 50 per cent deduction in fares for women senior citizens, five per cent reservation in Railway jobs, etc. Chidambaram, too, has to do something to command their loyalty like measure to contain price rise and duty reliefs for consumer durables.

Since the middle class forms a big chunk of the electorate, Chidambaram can ignore them only at heavy political cost. The salaried class has been demanding an additional deduction of Rs 1 lakh under Section 80C for long-term investments in life insurance premium/pension/annuities.

Employees in the IT sector who are required to work in different foreign tax jurisdictions have been pressing for abolition of double taxation of the fringe benefit on ESOPs.

The increasingly assertive, too, is demanding its pound of flesh. There has been demands from organizations such as FICCI to accord infrastructure status to social sectors like health and education. The SMEs which have been hit hard by recent want the tax holiday to be extended beyond 2009.

So unlike Lalu, Chidambaram will have a more unenviable task to balance the compulsions of politics and economics.

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