A week to go for the budget, and Pranab da is talking about fiscal consolidation. Consolidation would be the sensible thing to do, as the GFC is far from done and dusted, and vulnerable countries could yet be shaken down. For a national budget so reliant on borrowings as ours, punishment by bond, or currency, vigilantes could be brutal.
Cuts in spending are highly unlikely; subsidy cuts even more so - whether on food, fuel or fertilisers; worse, the fuel subsidy is an unknown, as crude oil prices remain volatile. Budget balancing would have to be achieved by raising revenue, and to be truly responsible this would have to be sustainable, not one-off gains from auctioning spectrum or stake sals in PSUs.
Direct tax rates are unlikely to go up; in fact, personal income tax threshold levels would have to be raised to compensate for inflation. What would seem to be easiest to do is to raise MAT; lobbies that would normally protest against this are now silenced in the wake of Radiagate. The Congress party, in fact, would gain brownie points by showing how tough it is in terms of shrugging off corporate concerns.
This would not, however, raise much by way of revenue. For this, I would look at an increase in excise duties; this would, in any case, be a reversal of cuts made in late 2008, to fight recession. Now, we have the opposite phenomenon - a recovery which is over-heating the economy. It would make sense to raise excise, especially in industries where the common man is not seen to be impacted. The one I can think of, off the top of my head, is cars. Will try to come up with more.
Cuts in spending are highly unlikely; subsidy cuts even more so - whether on food, fuel or fertilisers; worse, the fuel subsidy is an unknown, as crude oil prices remain volatile. Budget balancing would have to be achieved by raising revenue, and to be truly responsible this would have to be sustainable, not one-off gains from auctioning spectrum or stake sals in PSUs.
Direct tax rates are unlikely to go up; in fact, personal income tax threshold levels would have to be raised to compensate for inflation. What would seem to be easiest to do is to raise MAT; lobbies that would normally protest against this are now silenced in the wake of Radiagate. The Congress party, in fact, would gain brownie points by showing how tough it is in terms of shrugging off corporate concerns.
This would not, however, raise much by way of revenue. For this, I would look at an increase in excise duties; this would, in any case, be a reversal of cuts made in late 2008, to fight recession. Now, we have the opposite phenomenon - a recovery which is over-heating the economy. It would make sense to raise excise, especially in industries where the common man is not seen to be impacted. The one I can think of, off the top of my head, is cars. Will try to come up with more.
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