What's brewing for the budget plan?

By BankBazaar.com | January 18, 2010

More than 25% of the fruits and vegetables grown in India are wasted before they reach the consumers. This is one of the reasons for the high inflation related to foods items. Currently the food processing industry has a high excise duty for branded products. This prevents many users from being able to afford the products. It is expected that this budget will give a fillip to this industry. If one could preserve or prevent the 25% of the fruits and vegetables from decaying can one expect the prices to be lower by 25%?

There are a lot of discussions happening over the last few months between the various committees involved in preparing the budget and the stakeholders. Though no one in public knows about the exact proposals in the budget, some discussions with industry captains and the public do reach everyone. This article is a snapshot of some of these discussions and expected decisions in the forthcoming budget.

Gratuity Limit Increase

There has been consensus among a team of Ministers to increase the Gratuity Limit to Rs.10 lakhs from the present Rs.3.5 lakhs. The proposal will be presented during the budget session of the parliament. The earlier request from the salaried class was to remove the limit itself. So that all of the eligibility in the gratuity kitty of a salaried person will get paid out. The Rs.10 lakhs limit is still a good step in the right direction.

Stimulus for the Economy

It is expected that the stimulus packages that were released during the global economic down trend for the economy will continue. The packages include assured employment programs, infrastructure programs related to roads, easy access to loans for companies, less interest rate on loans by reducing the CRR and SLR.

It is expected that the same support will continue this year too. One of the key things that can go against the continued stimulus is the very high inflation.

Export Support Continues

Various supports given for the exporters can be expected to continue during this year too. Some companies have also asked for anti-dumping duties for products being imported from China. If implemented, the impact will be good for Indian companies and their employees. However the cost of some products for the common man may go up.

GST Implementation

This is a much talked about and many times postponed implementation. There are a number of benefits from the GST Implementation. The major benefit for the common man is the potential reduction in prices of products. The reason being the tax burden in the form of multiples levels of taxes on products & services will come down.

The government will also benefit because more companies and services can be brought under the tax net. So the Government will get lesser tax from more number of people leading to higher income and greater compliance. It is hoped that this budget will give a clear date for the implementation of GST.

Garments

Textiles industry is expected to get a number of favorable supports from the budget. This is expected for both the natural textiles and also the man-made fibers industry. For the ‘aam admi’, this will mean lesser prices for garments.

Food Processing Industry

More than 25% of the fruits and vegetables grown in India are wasted before they reach the consumers. This is one of the reasons for the high inflation related to foods items. Currently the food processing industry has a high excise duty for branded products. This prevents many users from being able to afford the products. It is expected that this budget will give a fillip to this industry. If one could preserve or prevent the 25% of the fruits and vegetables from decaying can one expect the prices to be lower by 25%?

Reforms in Foreign Investment

Reforms in the form of greater foreign investment in the financial services industry is expected from this budget – insurance for example. It is also expected that foreign investment in print media would be allowed at least to a small extent.

It is expected that foreign investment will also be allowed in the education sector. This will help to bring quality international education at affordable costs in India itself. Safety of the student is another major benefit considering the physical pains that our students are undergoing in Australia.

For the economy, this can be a double benefit for our foreign exchange: one – investment will come in, two – outflow of foreign exchange due to students going abroad for higher education will come down.

PSU Stake Sales

The Government’s holding in several PSUs is planned to be brought down. Earlier announcements were taking about one such stake reduction every 2 weeks. The cash is required for the Government to reduce its budget deficit and also to continue funding social causes.

It is hoped that this budget will set in motion the implementation of the plan.

Innovative Inflation Control

Traditional methods for inflation control like tightening / loosening of monetary policies may not be suitable in this economic scenario. So innovative methods to increase production and through that reduce prices for the common man has to be devised by the Government.

Summary

A lot is expected from the budget 2010-11. The announcement has been advanced by 2 days this year. Till then the common man has to keep his/her fingers crossed on the benefits that will given out by the Finance Minister.

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2 thoughts on “What's brewing for the budget plan?

  1. AV Pune

    No doubt the proposed policies to give a boost to present economy is a welcome move , but what we need is proper and timely implementation along with transparency , to get the result.The process has to be gradual and well designed.Rome cannot be built in a day , similarly economy cannot be changed overnight.

    Reply
  2. SWR

    The govt is known for its give & take policies. On one hand they reduce the tax & increase in another way to nullify any real advantage to the salaried class. Recent e.g. is the FBT; they removed the FBT on Companies but it resulted in the Employees shelling out higher taxes. The salaried class continues to be the gunniipigs & an easy source of extra tax collection. Even their own contribution to retirement is not spared; this is shocking especially when there are no welfare measures for the tax payees who shell high taxes throughou their lives!

    It is high time a reasonable & transparent tax policy is implemeted. The tax base needs to include all those who have been escaping the net despite earning much hgher income than the salaried class. One measure is by returning a part of the tax as pension, which would result in voluntary tax payments & thereby increase in tax collection.

    Reply

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