New Delhi: Finance Minister P Chidambaram will present the Union Budget on February 29. The presentation of the Budget is one of the most closely followed event in India as it affects almost every one right from the housewife, salaried class, corporates, entrepreneurs and even those who have retired.
To find out what are the expectations of the people about the budget, IBNLive organised an online chat with financial journalist Sandipan Deb on Saturday.
Here we reproduce the full text of his chat.
Sadik Ismail: What you think is the driving force behind Budget 2008? Is it the poor man, corporate, election, middle class or a consensual approach?
Sandipan Deb: I hope I am wrong but I fear that this Budget would be driven by election motives more than anything else. So expect lots of sops to the "aam aadmi", and dread the knowledge that most of the money will maybe not reach. I don't want to sound overly pessimistic, but I think this is what will happen. We are at a critical point in our economic and political history when the economy is doing marvellously but politically we are fragmented. I think it will be a politician's budget, not an economist's.
Ramesh Kumar: Don't you feel the present finance ministry is doing excessive with the salary class people in collecting income tax. He has ignored the expenditure, metro city living cost, children education cost, and medical exp of a salary class while imposing heavy Income Tax. Same time irritating too much the compliance -prone citizen and failed to develop any mechanism to take a large no of income tax thieves in there net. My question is the income tax payers are not given any privilege whether in hospital or other public utility services. In nutshell no motivation for the honest tax payers.
Sandipan Deb: Yes, the tax-deductible-at-source people. I am also one of them. We are the easiest targets. If I remember correctly, Yashwant Sinha, when he was Finance Minister during the NDA regime, had suggested some sort of special privileges for people who pay taxes. I wish the government could something on those lines. John Kennedy once said that that a patriot is known by the taxes he pays. Suppose we got stickers to put on our cars or on our softboards (like Vodafone stickers) that said: I am an Indian and I pay tax for every Indian who is not as well-off as me. I think I would be proud to have that sticker up. If only the government could do a huge sticker campaign like Vodafone did.
Preetam: Each budget is pointless rhetoric in liberalization and reforms. Why can't the budget push for healthcare and education for all Indians? Healthcare and quality education is out of reach for most Indians, but you journos are obsessed with reforms.
Sandipan Deb: There is the NREGA scheme which envisages employment for everyone. But it's not working as well as it should. We are growing at 9.6 per cent a year, and our employment rate is falling at 3 per cent a year. This is scary. There is nothing more important we should do than invest in education. I will go so far as to say, education for the girl child, because that has ripple effects into various other areas that hold us back. Primary education is paramount. We need to set up some sort of mission for this, which is directed by people who are extraordinary achievers and tell them, do this for your country, we'll give you ten years, and you will not be bound by bureaucracy, just get all our children into school, make sure they have teachers, and change the nation. Governmental initiatives will not do it, there's too much leakage and corruption, you have to hand it over to people who do it from their heart and without any interest other than doing this because it needs to be done.
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Chanakya: do you see the FBT as relevant in today's scheme of things in india inc? Why cant companies be levied greater corporate tax and the archaic FBT done away with? What do u feel?
Sandipan Deb: I think FBT is a completely wrong and unfair tax. It should just be done away with. Corporate taxes in India are quite on par with the world, but FBT is a shame.
Greta Garbo: there are 4 states going to polls this year, general elections are due next year. the Left has been making enough noises. What do you think the FM will manage to do this Budget? Will it be another SAFE one?
Sandipan Deb: Greta Garbo? Her most famous quote is "I want to be alone." :-) Anyway, I think it will be a very political budget, it will be about giveaways and sops, and it will be about the four state elections. If you are middle class, don't expect much. I hope I am wrong. I am middle class.
Dr US Arora: How is the Sensex expected to behave till the budget time?
Sandipan Deb: If I knew that, I would be much richer than what I am! :-) But what my friends in the investment industry tell me is that there is no need to panic. Indian industry is very, very independent of government policies now, the budget doesn't affect so much as 10 years ago. And Indian industry is on a spectacular growth trajectory. FIIs who are dumping Indian stocks because they have to compensate for the losses made in US markets will all come back. 9.6 per cent growth is not a joke, on such a large base. I don't see people losing money on the Indian stock markets in the long term, even the medium term.
Bala: Hi, Why direct tax and excise duties are high in India? Why only monthly income group is targeted by the Govt and others just being let off?
Sandipan Deb: Simple. We, the monthly income tax people, are the easiest to target and tax. The super rich have never paid their dues and they are powerful enough to make sure they aren't caught. Sad. But, Bala, you and I are the guys who can't avoid, evade, or escape.
Bala: What can be done to the skyrocketting home prices and huge rentals all over India?? I think many politicians are making huge money by creating speculations (like Airport, IT parks). Will it lead to sub prime crisis in India if not now down the years (in case of a recession cycle)? How budget can address it?
Sandipan Deb: I live in Gurgaon, where prices have gone through the roof over the last few years. If I sold my house now, I could retire :-) (Of course, I won't, I want to live in it). Land/ real estate in India is a very murky area. But our economy is doing so well, that I don't see a sub-prime crisis developing here. The RBI has been, by raising interest rates continuously for the last three years, trying to curb the housing boom. But I personally feel (and it's my personal opinion) that prices will stabilise but not come down. There's too much economic activity happening, which is increasing the incomes of too many people and fuelling their aspirations as never before. The Indian middle class is rocking. In Delhi, rentals have actually fallen, because people are more interested in buying rather then ranting. In Calcutta, 50 per cent of the billboards are housing estate ads. Tier II towns are on fire. There is a great economic boom happening, and I am very optimistic about it.
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John: Sir, My CTC is Rs 4,50,000. Can I expect some tax relief from the FM in the Budget?
Sandipan Deb: No chance.
Wordwork: Sir, my question may seem unimportant but just wanted to know why can't the FM speak in plain English when he gives his budget speech? Budget speeches are so full of jargon that to most people they seem like Greek and Latin.
Sandipan Deb: The budget speech is (and it shouldn't be, but then...) is a political statement too. Lot of political thought goes into it, and as a business journalist I can tell you, the surprises that the fine print of the budget reveals when we get the full papers are every year startling because there are many important things that have been slipped in, and not all mentioned in the speech. I can assure you that it takes about seven days for financial experts to figure out what exactly has been proposed. And now you have a coalition government, so there is even more reason to be opaque, slip something through, and hope that the Left takes some time to figure it out.
Girdhar: Is Mr Chidambaram is his own when he is preparing the Budget, or is the Congress chief watching over his shoulder?
Sandipan Deb: The Congress chief is definitely watching over his shoulder, since this is the election budget.
Mrinal Kanti Banerjee: In spite of government’s assurances there are many cases where Income Tax Refunds are still not given even after 10 years! What could be the reasons? Why honest tax payers are always victims?
Sandipan Deb: As I said, honest tax payers are the easiest targets and easiest to victimise. Corruption and inefficiency in the income tax department is one of the most venal threats that the middle class faces, but there has been no political will to clean it up. You must also understand that the income tax department is a great instrument in the hand of a dishonest government to threaten and hurt people and make them fall in line.
Indrajit Das: What is in stock for the IT/ITES sector?
Sandipan Deb: I don't think there will be anything significant in the budget for the IT/ ITES sector. As an eminent economist once told me, the reason, IT has flourished is that it was never part of any Five-Year Plan and the government never tried to help it. Thankfully. The government knows that now. Te future of the IT/ ITES sector is in its own hands.
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Manohar: Do you think that the finance minister will consider the difficulties of a common tax payer?
Sandipan Deb: From past experience (which, as mutual fund ads say, are not indicative of future performance), I would say no, not much. But remember, this is an election budget. It will all depend on all the market surveys and polls that the UPA will surely be doing right now, and trying to pinpoint the dissatisfaction levels at each demographic and the importance of that demographic for the coming the Lok Sabha elections. But I would not expect much for the middle class (those who have access to the net and can do a web chat).
Archana: Will the FM be able to push the liberalization agenda this time? I felt his last budget was not progressive.
Sandipan Deb: I think liberalisation will be less on his mind than the Lok Sabha elections and the upcoming four state elections. But we are fortunate that economic growth has now substantially got itself free from government policy. Even if the budget resembles an Indira Gandhi budget of the 70s, growth won’t stop, people wont stop climbing up the poverty ladder. And who knows, if the government becomes more efficient, we could grow much faster, and make many, many more Indians proud and self-sufficient.
Japesh Thakur: A peculiar dilemma of all budgets is to strike a balance between plan and non-plan expenditure. Over the past few years our non-plan expenditure like defence and subsidies have shot up substantially. What is your assessment for this budget, especially the subsidy part?
Sandipan Deb: Again, since this is most probably the last budget before elections, I fear subsidies will, if not increased, at least not be checked. Has our defence budget really gone up substantially?
Kushal: What according to you should be the approach of this budget. Should the US economy recession taken seriously?
Sandipan Deb: I don't think we should panic at all about the US recession. Indian industry is doing fine. Just look at Reliance, ADAG, Tatas, Airtel. We have an industry today that thinks global, acts global. We are much better off as a economy than the US.
Gaurav: Sir, I'm an entrepreneur. Do you think the FM might consider giving some relief to start-ups?
Sandipan Deb: I don't know if he will, but he should. The entire post-liberalisation Indian economy has been built on the entrepreneurial spirit. Also, we are seeing jobless growth. The GDP is galloping, but employment is not growing. This situation demands more encouragement to entrepreneurs, so that more and more Indians decide to forge their own density instead of being wage slaves.
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Mrinal Kanti Banerjee: Social security, drinking water, cheaper housing for common people, public transport system, and health care facilities for common people, available of cheaper medicines, more schools and colleges for the future generation should given top priorities in this budget. I wander whether it would possible to give attractive incentive to construct cheaper houses for common people.
Sandipan Deb: In his last budget speech, the minister said that 5 lakh (or 10 lakh, I don't have the details with me right now) cheap housing for poor people had been built. I have no idea where they have been built, and who's living in them. That's a great story to follow up on, as a journalist. I am between jobs right now, but I promise you that I will get people to go and see what these houses are like, if they really are there.
Rahul Sinha: how can the susceptibility of the stock market to rumours etc be checked, given the kind of risk averse investors India has?
Sandipan Deb: I have no answer to that, Rahul :-) Stock markets all over the world are susceptible to rumours. But as a long-time watcher of the Indian stock market, I can tell you that it is much less susceptible now than it was say 10 years ago, even 5 years. It is now susceptible more to trends like Tokyo is not doing well, or London is falling, and investors selling because they believe too much in the connected world economy, or because they have lost money somewhere else and they need cash. I haven't sold any of the stocks that I hold.
Rohan: What big tax reforms must the FM take in this budget?
Sandipan Deb: Frankly, I don't expect any big tax reforms. If you are thinking of agricultural income tax, Rohan, that's not going to happen. What other big tax reform can one expect? Our customs tax and suchlike, we are bound by agreements with WTO to reduce anyway, we don't have a choice. I don't foresee any dramatic moves. Of course, I'll be happy if I am proved wrong.
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