This is the toughest time for anybody to be the finance minister of India. The greatest challenge in front of finance minister at this juncture is to control the inflation and at the same time keep the growth rate steady. I just wonder how people forget that P Chidambaran (fondly referred as Chiddu Babu & PC) had won accolades in the past for presenting the dream budget of India. I don’t have a single doubt that our economy is in the best hands and so we don’t need to panic.

There is a clear cut message from the Finance Minister Mr P. Chidamberam that India Inc is matured now and growing at a good pace. Both manufacturing and service industry is growing at the rate of 11% which is really commendable and now the time has come to concentrate on agriculture, social security, education and backward section of society. It is very much in the interest of the country that agriculture keeps growing at the rate of 4 %.In the long term this is again going to help the corporate India when the buck will be passed back to them as our country develops as a whole.

Since last two days all the business papers are busy criticizing the budget as Neutral Budget, No Profit – No Loss Budget, and Aam Aadmi missing Budget. We had been shouting at the top of our voice that this budget has nothing for Aam Aadmi. Can someone explain the criteria to qualify as ‘Aam aadmi’?

I beg to differ from media men and feel that this budget has everything for ‘Aam aadmi’. There can not be better budget than this to cater to the needs of ‘Aam Aadmi’.I define ‘Aam aadmi’ in a different way. For me it is 26% population of India which is still below the poverty line and earns less than 1000 bucks a month. Aam Aadmi is not me nor you who is privileged enough to browse the net and read this article.

Finance Minister on being asked what is there in the budget for the Aam Aadmi ?

Well, I can turn around and ask you what is not there in the budget for the Aam Aadmi. If I offer one hundred thousand scholarships for children who might otherwise drop out, isn’t that for the Aam Aadmi. If I provide for jobs for the physically challenged, isn’t that for the Aam Aadmi. If I offer one crore families social security through an insurance scheme, is that not for the Aam Aadmi. If I offer seven million structures for ground water recharge, isn’t that for the Aam Aadmi. If I undertake to restructure over a thousand ITIs, isn’t that for the Aam Aadmi. So who is this Aam Aadmi that you are talking about, and we are talking about? The beneficiaries of all these schemes are Aam Aadmis

‘Aam Aadmi’ – Centre of discussion

I already had a heated discussion with my friends for an additional 1 % secondary education cess imposed by the Finance Minister. We can’t expect finance minister to distribute freebies to entire section of society. If he increases the exemption limit from 100K to 110K, there has to be some tax to offset the deficit in tax revenue of the government. We don’t appreciate the fact that he has increased the basic exemption limit by 1K which will definitely help the individuals belonging to a lower tax bracket. There is a counter argument to this saying that the exemption is offset by introduction of secondary education cess of 1%. The net effect of exemption and additional cess is that an individual gains 30 bucks even if his taxable income is 500K. I don’t think that anyone would stand up to say that a person having a taxable income of 500K lies in the category of ‘Aam Aadmi’. Furthermore, this cess is for improving the literacy rate of our country.

The most interesting move made by the finance minister is to provide the social security to 1.5 crore rural landless households in the form of insurance (Aam aadmi bima yojna) against life, permanent disability and health. This clearly is a sign that India is growing and the time has come to address the rural section of society. Secondly, the exemption limit of medical insurance under section 80D is increased from 10000 to 15000 for normal individuals and 15000 to 20000 for senior citizens. Reduction in custom duty of medical equipments and chemical raw material are expected to bring down the prices of medicine. This again is a step to build a better and healthy India by encouraging citizens to go for medical insurance.

In order to control the Inflation, forward trading in food grains is completely banned which is definitely going to bring down the prices. Excise duty on food mixes (I hope dosa lovers are reading this and are with PC), instant ready to eat food, edible refined oil is slashed. Further condensed milk, meat products, and fish are completely excluded from excise net to fight inflation. Custom duty on polyester is cut from 10% to 7% which will bring down the prices of clothes.

Corporate India – Passing the buck to ‘small’ sector

In my earlier article, I had described our economy in a phrase – ‘Rich is getting richer, poor is getting poorer.’ It seems as if my voice reached Fin Min and the issues are addressed in this budget. ‘small’ is the buzz word for Finance Minister and in the corporate sector too he has given all attention small scale industry and small service provider. The exemption limit for small scale service provider is raised from 4 lakhs to 8 lakhs. Small businesses with taxable income upto 1 crore are exempt from surcharge. Small Scale Industry excise duty exemption is increased from 1 crore to 1.5 crore.

The Central Sales tax rate is cut from 4% to 3% which is step forward to abolish CST and bring Goods and Services (GST) Act in action by 2010. Imposition of FBT on ESOP is any way going to be passed on to employees and so corporate India need not worry about it. ESOP once again is given to employees at the strategic level thus keeping the middle class and low class away from the brunt of it.

There are so many furores over the imposition of MAT on IT companies which were earlier exempt under section 10A and 10B. India is already an IT hub and we really don’t need to continue with these exemption. However, the effect of MAT on IT companies earlier excluded from MAT will be nullified as they get the tax credit of tax which is paid overseas by them. The increase in Dividend Distribution Tax from 12.5 % 15% is done to meet the shortfall created by exemption of surcharge given to small companies.

There is good news for booming telecom industry as the Finance Minister has asked DoT to form a committee to look into the multiple levies from the telecom companies in form of licence fee, spectrum charges, access deficit charges, sales tax, custom duty, stamp duty, Octroi, Service Tax, VAT. As the issue involves various departments it can be resolved only with a consensus of all of them. I am very sure that DoT will come out with a single rate which will reduce the net outflow of Telecom companies’ at least by 2%.

To sum up the entire thing we can say that this budget was meant for transforming the ‘SMALL’ (small being referred to small individuals and companies, and rural and backward sector) into ‘BIG’ and ‘POOR’ into ‘RICH’. We are in a unique situation of growing inflation and growing economy and this growth is required to be passed on to backward sector or else the unbalanced growth may put an end to our success story.

I don’t have any issues being taxed 1K extra a month if it goes for the development of my country. I would love to see a Social Security System like US in my country. “Sir, I urge to introduce 1 % health cess which would go for the creation of a Strong Social Security System in my country.” I am with PC and his budget. (I hope Chiddu Babu is listening………….).

It is quite unjust to take away the credit from Finance Minister in a situation like this when he can not afford to give away the growing GDP and at the same time control the surging inflation. It is time to congratulate the Finance Minister for his budget which is all for ‘Aam Aadmi’.

Congratulations Sir!

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