Industry holds breath as FM presents Budget 2013

As the Finance Minister P Chidambaram presenting the budget 2013 in the Parliament, the Indian industry is holding its breath with anxiety whether it will face any new taxes at a time when the economy needs a booster dose for growth.

It would be unrealistic to expect a “big bang” Budget from the Finance Minister as he does not have much an elbow room, given the precarious state of fiscal, not supported by growth.

“Tax revenues are not likely to show big rise in the wake of modest economic expansion. The only option before the government is to cut expenditures to get back to the fiscal discipline over which there are no choices available,” said an ASSOCHAM poll report.

It said amidst debate on the so-called super-rich tax and inheritance tax, India Inc faced a lot more uncertainty about the Budget this year than in the last few years. 

“It looked as if the idea of super –rich tax or inheritance tax could have been floated as a trial balloon in some quarters to gauge some reaction. However, it has ended up creating uncertainty and anxiety,” ASSOCHAM poll report said.

P Chidambaram

It is not as if those at the top end of earnings do not want to part with some resources for the national good, the trouble is that there are collateral issues like cost of compliance.

Besides, it should be carefully studied whether the new taxes are worth the administrative efforts in terms of its potential for revenue generation.

Instead, the pollsters suggested that a great push is required to move towards implementation of the Goods and Services Tax without further loss of time. Whatever differences are there with the state governments and opposition parties, must be resolved so that the economy gets a much more efficient tax administration and the consumer is left with more resources to spend.

At the pure expectation level, surprisingly “there are not huge expectations unlike in the past when the scope for tinkering was possible”.

At some level, there is also this anxiety whether Chidambaram will be able to stand up to a huge political pressure from the Congress Party and other UPA allies to go in for big time social schemes in the run –up to the 2014 general elections.

It was in this context that the stock market reaction was taken yesterday. The recent stock market rally, as is well-analysed, did not come on the back of great economic fundamentals but thanks to greater liquidity coming from the global sources, mostly the US.

“It cannot go on forever and, therefore, we need to get our own house in order”, said President, Rajkumar N Dhoot.