Wednesday, February 28, 2007

Budget-2007




Yesterday, India’s honorable finance minister P. Chidambaram (I suppose he has earned this respect) presented the fourth budget of the first Congress led collusion government. I am neither an economist nor have any formal background in finance, my sole link to Indian economy is that I am a regular reader of economic times (www.economictimes.com). So while the experts evaluate the budget, I will take my pick on it.

To start with, I feel there is nothing out of the box in this budget. No big eye-catching changes, no new policies, neither are there any great disappointment. However when our country is growing at 9.2% GDP, everyone did expect some path-breaking changes. Personally, I would have liked some inputs or change in policies related to Infrastructure development (unfortunately nothing of that sort can be seen). Money is pumped into education and healthcare, however I do feel money for education is never managed efficiently. Yes, comparing Indian healthcare system with the rest of the world, this was badly needed money. The major talk in pre-budget analysis was on the 6.77% inflation on Feb3rd, 2007 and some analysis shows that the way Indian inflation is calculated its not entirely correct and the real number is somewhere around 9%( I read this in The Economist magazine, though did not understand the details of it). I did not see any changes made in the budget, which would say the inflation, will be tackled via this or that policy.

On personal front the increase of 10,000/- in the IT-exemption limit is a good figure. It’s a rise of 10% in exemption from the previous 1,000,00 exemption limit. Thus the raise in exemption higher than the inflation rate is a good feature. IT-exemption limit of 1,45,000/- for women and 50,000/- for HUF if not great but definitely a good figure. From my last trip to India, I found out that service tax of almost 12% on all goods is a big deal and speculations were for raising the bar, however FM left the 12% untouched so its good for “aam aadmi”.

As I am talking of Budget would like to present my views on the railway budget. The Business School Poster-boy, “Shri. Lallu Prasad Yadad”, has done exceptionally well. I believe, the profits over 20,000 CR Rs in last fiscal year and a growth of over 15% is truly one of the biggest turn-around stories for almost bankrupt Railways. I feel the 4% cut in AC trains fares and 1Re cut in unreserved compartments fares will go well for Lallu’s political career. Also the dispersion of ticket counter with introduction of e-tickets, TC’s having handheld device and converting all super-fast train Wi-fi will help in improving railways image. Once again, with my limited knowledge on this subject I did like the approach taken by railways, and I wish the year 2007 as declared “The year of cleanliness” by Railways brings about some drastic change in its overall look.

To sum up my views Lalu did good but for Chidambaram I feel it’s a so-so budget where the FM did nothing, but let the things run the way they are. So it’s more like a low risk approach. Is it good or bad? We will find it out next year!