The first question regarding the Budget is whether the FM has decided to deal with the reality of his fiscal situation, or will project revenues based on a much higher growth rate than is likely. Ajay Shah’s tracking site, http://www.mayin.org/cycle.in/tracking.html, correctly predicted the last number of 6.1%; it is now showing a GDP growth number of below 5%. There is no question of the FM registering this.
The lowest GDP growth number he is likely to bake in to his budget predictions is 7.5%; this will lead him to grossly over-estimate tax revenues; nevertheless, it will call on additional resource mobilisation, now that higher expenditure has been legislated via food, fertiliser, and NREGA spends; not to mention the refusal to hike diesel and kerosene prices.
So how will he mobilise these resources?
Firstly, I think he will raise the MAT (Minimum Alternative Tax), for which there is no longer any justification.
Second, I would believe he will add back some excise, in a (partial) reversal of the 2008 stimulus measures.
The coverage of service tax will pretty much certainly go up.
In addition, I am thinking he will come up with one or more of the following, or their variants:
- - Some form of Voluntary Disclosure Scheme, to bring back money from abroad
- - Some removal of exemption on long-term capital gains on equity investments
- - Enhancement of wealth tax/a new ‘Upper-Upper’ slab for Income tax on those with income above some level like 25 or 30 lakhs per annum.