Politically correct budget targets inflation

UPA Government’s fourth budget does not hold any surprises. It has turned out to be a politically correct exercise to tame inflation and price rise.

At the same time, Finance Minister Palaniappan Chidambaram’s budget does not take any major measures to further economic reforms.

And, it makes the right noises about thrust on education and healthcare that will go well with the electorate. Chidambaram went a step ahead to describe it an “ aam admi ” budget that brings in “include more people” as beneficiaries.

In a budget that talks about an expenditure of Rs 681,458 crore, Finance Minister has proposed to mop up just Rs 3000 crore mostly through the dividend distribution tax, one percent increase in education cess across all taxes and keep the macro-economic indicators intact.

There are no changes in the personal income tax slabs, rates; corporate income tax, central exercise, service tax rates and the other levies. Only the peak customs duties have been slashed by 2.5 percent on non-farm products to make the industrial inputs cheaper that is aimed at tempering with retail prices of consumer goods.

For the first time in years, a semblance of stability has been brought to tax rates - both direct and indirect - except for minor tinkering to address the politically volatile issue of inflation.

For both corporates and markets, it was a mixed bag. Stock market operators, investors and investors are particularly unhappy with the increase in dividend distribution tax by 2.5 percent and bring all knowledge-based companies under the minimum alternative tax (MAT).