By krsna Khandelwal – A veteran market analyst
Friends,
Have a look where the Budget Re comes from:
Corporate Tax : 24p
Income Tax : 15p
Excise Duty : 15p
Custom Duty : 13p
Borrowing : 10p
Non tax revenue : 10p
Service Tax etc. : 7p
Non debt Capital : 2p
(Total receipts would be Rs 750884 crs in 08-09 against revised estimate for 07-08 of Rs 709373 crs)
The Budget re goes for:
Interest Payments : 21p
Central Plan Exp. : 19p
States share in taxes : 19p
Defence Exp. : 11p
Other Non Plan Exp. : 10p
Subsidies : 8p
States & UT Plan Assistance : 7p
Non Plan Asst to States/UT : 5p
The goal of eliminating the revenue deficit has been postponed by an year.
Fiscal Deficit for 08-09 would be 2.5% against 3.1% for current year.
Total Budget Expenditure stands at 14.1% for 08-09 against 15.1% for current year, as a percentage of GDP.
Tax Revenue for 08-09 estimated at 12.9% against 12.5% for current year, as a percentage of GDP.
Subsidies would be 1.3% in 08-09 against 1.5% in current year, as a percentage of GDP.
It seems the FM has not lost track of reforms in the budgetary financing exercise even under pressure for populism. His budget has lower subsidy element and higher tax revenue as percentage of GDP. His budgetary expenditure is lower at 14.1% against 15.1% of GDP clearly tells that govt’s role is diminishing and welfare remains its main engagement while the investment initiative has been left with the private sector. It is said ‘Least Govt is best Govt.’ and this seems to be happening too. The only problem that may mar the whole dreamy state of expectations is that the spent rupee may not be fully utilised for the purposes it is meant for.
The food grain production has been estimated at 219.32 million tonnes for the current year and happens to be a record. There is yet a need to be vigilant on agricultural front as one bad monsoon may create hardship for masses.
The duties and taxes have been reduced barring a few cases which have no big importance generally but for the markets.
As has already been covered in sector wise analysis, nothing more needs to be told and the sector related share price movement has been in line with expectation, budget notwithstanding.
People are too worried for what is happening in USA and I don’t think so much weightage should be given to markets outside as we will be affected only for those particular sectors where there is supply of cheaper metals and have our IT export dwindle too much. This does not seem to be the possible scenario. The flow from USA’s capital pool has come down, may be due to fiscal turmoil there but with passage of time the cheaper interest rates there and higher interest rates here would pave way for money gushing back here. Further benefit will be that here too interest rates will reduce. We should not speculate about the re/$ parity as it is some thing which no body can predict and should be best left out for the calculation. The fall in market here due to foreign economic developments and market behaviour is a good opportunity to enter market here. I may reassure you that the excise duty reduction, Cenvat rate reduction, CST reduction and custom duty reduction together will be very beneficial for the industrial sector as a whole.
Hari Om
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