It takes the nation nowhere: BJP
BJP’s Chartered Accountants Cell made an in-depth study of the Union Budget 2006-07 presented by the Finance Minister Shri P. Chidambaram on February 28, 2006. Their analysis will be of great interest to the readers.

Directionless Budget

Budget snatched what people gained during NDA reign: Advaniji Reacting to the Budget presented by UPA government the Leader of the Opposition in Lok Sabha, Shri L. K. Advani, stated: NDA successfully unleashed India’s creative energies through all-round infrastructure growth, low inflation that ensured prices of essential commodities were held down, and low interest rates. All this was achieved while keeping tax rates low. This Budget has reversed all these gains. The Economic Survey identified infrastructure and inflation as the biggest concerns for the economy. The Budget has chosen to ignore both these warnings. The Government which tom-toms its so-called commitment to the Aam Aadmi, has provided only Rs.4000 crores - just 1% of the Budget – for Agriculture which contributes 24% of India’s GDP. At a time when farmers’ suicides have assumed alarming dimensions, a Budget that callously ignores the Kisan, punishes the middle class and gladdens only the affluent deserves all-round condemnation.

The various budget announcements including policy announcement made by Finance Minister on behalf of the Government are directionless and reflected a very sorry state of affairs. Out of the total receipts of Rs. 5.6 lakh crores a sum of Rs 4.88 crores is proposed to be spent on the revenue account and only a sum of Rs. 0.3 lac crore is proposed to be spent on the capital account. The balance amount being spent on interest payment and repayment of borrowings. No concrete plan can be implemented with a small allocation of capital expenditure. The following areas have not been given enough attention.

Bharat Nirman

The Finance Minister announced a plan in 2005 Budget as follows :

It is important for India to achieve the above target. Very little has been done in the direction of implementation except preparation of an action plan on paper and very minor achievements, which are nowhere near the ambitious plan. The fund allocation of Rs. 18696 crore for 2006-07 for the above is very small considering the massive size of the plan to be implemented in such a large population.

It is important to note that only 15% of the total plan expenditure is earmarked towards capital account. In the overall budget for such a large country of ours only a sum of Rs.28966 crore is proposed to be spent on capital account plan expenditure out of revenue receipts of more than 4 lac crore. Unless the Government determines to reduce its revenue expenditure by reducing the size of the Government and wasteful expenditure on bureaucrats, procedures and reduce the size of the Government, it may not be possible to achieve the Bharat Nirman Project, in the absence of adequate allocation.

Agricultural Growth

A major area of concern is poor growth of the agricultural sector, which is meagre 2.3% as compared to 10% during 2003-04 (the last year of NDA Government). No concrete plan is proposed to boost agricultural growth, supported by a concrete action plan. The UPA Government is trying to befool the public at large by only announcements of large programs without any real intention of implementing them or bring-forth a concrete plan into motion. UPA Government is playing with emotions of the people of the country.

Employment

The Economic Survey released on 27th February, 2006 and various other statistics available from the Government, indicates a very poor state of affairs of employment of youths of the country. If we consider the employment of youths within an age bracket of 16 to 35 years, in several States more than 20% youths are unemployed. The position in a highly educated State like Kerala is still worse where the rate of unemployment is more than 30% among the youths.

The Rural Employment Guarantee Scheme announced by the Government last year has not been implemented so far except being ceremonially inaugurated by the Prime Minister recently. The allocation of only about Rs. 14300 crores and selected villages of 200 districts is only a tip of the iceberg. According to an estimate, a minimum sum of about Rs. 200 thousand crore per annum will be necessary in case of the employment to youth if all the villages have to be given a minimum employment of 100 days.

Scarcity of Power :

According to the Economic Survey there is an acute scarcity of power all across the country and a sum of Rs. 3 lac crores have been lost every year on account of scarcity of power. The Finance Minister has announced that about 82 Projects are under construction, which will add 39000 MW of power (public and private sector put together), of which 15000 MW is likely to come up to stream by 31st March, 2007. This capacity addition is too small as compared to current shortage of about 100 thousand MW and a projected shortage of 200 thousand MW by about 2011. The proposed 20000 MW Projects of the Government have to be implemented on war footing basis, if we need to reduce the current losses of GDP.

Central Sales Tax - VAT - Government not meeting commitment

At the time of implementation of VAT last year, the FM promised to reduce the Central Sales Tax from 4% to 2% with effect from 1st April 2006. The FM failed to keep his promise and thereby betrayed the trading community. The FM has set a target of 1st April 2010 to move to a unified GST (Goods and Service Tax) Regime, but in the name of concrete steps only Service Tax has been increased and Central sales tax has not been touched nor any major reforms in VAT have been addressed in any manner.

Service Tax

The rates have been increased by 20% (10% rate increased to 12%). A large number of additional services have been covered and the scope of some the existing services widened. Legal and medical services have not been covered. The Chartered Accountants will now have to pay tax on all their services, irrespective of the fact that similar service from lawyers and other non-professionals will not be paying tax.

No concrete action is proposed to widen tax base. Even 1/6th scheme has been abolished. The Finance Minister wishes to rely on Annual Information Report and Permanent Account Number for identifying new assessees.

Fixed Deposits have been granted deduction up to Rs. 1 lakh from the income u/s 80C of the Income Tax Act. This seems to be targeted to channelise larger resources to the Banking Sector, which has started facing the liquidity stress. The lending rates by banks have already been firming up.

Disinvestments, governmental subsidy, labour reforms and other important aspects, no policy initiative. Cooperative Banks need regulation and development. Income tax imposition not warranted.

Mid day Meal

In the allocation of Rs. 2 per day for the mid day meal including the administration cost (which is also 70%), no real benefit is being given to the needy poor students of the country.

Mining Sector

The reduction in growth rate of the mining sector from 5.8% in 2004-05 to 1% in 2005-06 is of great concern.

Long Term Capital Gain Tax

Long term Capital Gain Tax on listed securities is at present exempt. The FM proposed to tax the same in the hands of corporate at the rate of 10% in the name of Minimum Alternate Tax (MAT).

Environmental changes

No steps proposed despite so many calamities and the adverse impact of environmental changes has to be taken care of.

Health - Social Security

No plans of any kind in place.

Housing

Real estate prices are soaring and out of the reach of poor, middle classes and even higher middle classes. No concrete steps taken except leaving everything to property mafia. FBT and Banking Cash Transaction Tax not withdrawn, despite unnecessary harassment and paper work arising from these.