The Telegraph
Since 1st March, 1999
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It’s the economy, stupid!

New Delhi, Feb. 28: When the going’s good in the economy, budget making is easy. That’s why Palaniappan Chidambaram turned poetic at the end of his long speech.

Everyone clapped ' because there’s no income-tax change. As an expert said: “There are no nasty surprises.”

The budget story could have ended there, but then Chidambaram had to quote Henry David Thoreau to encourage builders of castles in the air. The foundation can follow, he said.

Chidambaram was actually talking about a growth rate of 10 per cent, up from 8-something now which has made it possible for him to cut the government’s deficit and promise more of the same if the economy god keeps smiling.

If you’re planning to buy a car ' below 1200cc ' you should be smiling, too, because prices are dropping, thanks to a duty cut. Drinkers ' the Coke, Pepsi variety ' can laugh, for the same reason. And pasta will be cheaper. But for the sake of desi-videshi equity, Chidambaram announced excise duty relief for dosa and idli mixes also.

The fringe benefit tax, which he announced last year biting into corporate perquisites, stays but its effect in some cases has been moderated. Expenses on brand ambassadors and celebrity endorsement have been excluded. The threshold for charging the tax on contributions made by employers to a superannuation fund has been fixed at a “generous” Rs 100,000 per employee.

Keeping money in banks has become attractive again. If you make a deposit for at least five years, the amount will be deducted from taxable income under Section 80C, but within the overall Rs 100,000 ceiling he fixed last year.

You can also invest in a pension fund up to Rs 100,000 a year, against the earlier ceiling of Rs 10,000. But this will be under the Section 80C ceiling of Rs 100,000.

Banking cash transaction tax stays and use of PAN will become mandatory in more high-value transactions.

The minister raised the securities transactions tax levied on stock market deals by 25 per cent. He raised the minimum alternate tax on companies from 7.5 to 10 per cent. But the market took both in its stride, going up by 88 points.

Service tax has been put up from 10 to 12 per cent. The additional revenue expected from tax measures is Rs 6,000 crore.

Those looking for big ideas were left disappointed. If the speech was still long, it was because Chidambaram spent a lot of time on programmes for farmers. Some pointed to the fact that many big decisions had been taken outside the budget. It’s the continuation of a trend that became evident last year, reducing the budget to an accounting exercise.

“It has not moved enough in that direction. Stability and predictability are virtues in public finance,” said Ashok V. Desai, former economic adviser to the finance ministry and consulting editor, The Telegraph.

Subir Gokarn, chief economist of credit-rating agency Crisil, said: “Slowly, it shall be seen that major policy changes cannot wait for one day of the year as such decisions have to be taken based on the requirements of specific situations and demands.”

So there might come a time when the budget will be just revenue and expenditure plus the poetry springing from economic growth.

India would then have caught the “wind”, as Chidambaram said, quoting Swami Vivekananda. “The wind is blowing; those vessels whose sails are unfurled catch it' those which have their sails furled do not'. Is that the fault of the wind'”

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