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New Delhi, Feb. 28: P. Chidambaram played Bharat Builder in Delhi and left the Reserve Bank to take care of his reputation as Reformer in Mumbai.
Between the building and the reforming came some cutting that the India which pays taxes blessed the finance minister for. He slashed income and corporate tax rates. For individual taxpayers standard deduction was removed, but savings up to Rs 1 lakh in a year would be deducted while calculating taxable income at all levels.
?This budget is an attempt to lay down a path in which growth and equity will reinforce each other and build a new India,? Chidambaram said in a budget speech that could be the longest ever, lasting over two hours.
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Much of his expenditure proposals under what he called a New Deal for Rural India ? or Bharat Nirman ? and for health and education were straight out of the commitments made in the common minimum programme.
The Left quickly called the budget as having engineered a ?paradigm shift? and set a ?new direction?. It was difficult to tell how much of this was under pressure from the Left and how much because of Congress president Sonia Gandhi whose concerns are said to be similar to those that gave birth to Indira Gandhi?s Garibi Hatao.
After the Reserve Bank?s announcement in Mumbai allowing foreign banks to acquire controlling stake in private Indian banks, the CPM?s reaction was not known but the Left has opposed banking reforms.
Other than this, where the political response might be learnt only later, the budget has left smiling faces in most corners. The stock market rose by almost 145 points, taking the Bombay sensitive index to an all-time high of 6713.86.
?We are happy that it (corporate tax) has been brought down to 30 per cent. It?s an extremely good move,? said N. Srinivasan, director-general of the Confederation of Indian Industry.
One measure that proved controversial from the moment of its birth was a tax of 0.1 per cent on withdrawal of more than Rs 10,000 from a bank in a day. The tax will also apply to cash deposits of a similar amount made in a day to buy a bank draft or banker?s cheque. There were howls of protest from MPs as Chidambaram announced it.
Strong doubts were expressed by economists about the noble schemes and funds for rural India and the revenue and expenditure numbers in the budget.
Govinda Rao, director of the National Institute of Public Finance and Policy, asked if the government had the delivery mechanism to ensure that the benefits of these schemes reached the right people.
From allocating Rs 11,000 crore for the rural employment guarantee scheme to stepping up the outlay for the rural health mission to Rs 10,280 crore, social development was at the centre of the budget.
?Bharat Nirman has been conceived as a business plan, to be implemented over a period of four years, for building infrastructure, especially in rural India,? Chidambaram said.
Its six components will be irrigation, roads, water supply, housing, electrification and telecom connectivity for villages.
If these sound like the components of the Garibi Hatao programme, Chidambaram also made an important departure from the seventies? philosophy of taxing the already taxed some more.
Even as he lowered income-tax, customs duties were cut to bring them in line with rates in Asean countries.
But the surcharge of 10 per cent on income-tax will continue, though from a higher income level of Rs 10 lakh.
A new fringe benefit tax was introduced at the rate of 30 per cent on perquisites paid by companies to their employees.