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Budget 2011:Will FM deliver on expectations?
By Binu Paul, SiliconIndia
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Thursday, 24 February 2011, 13:52 IST |
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4000 crore for the 9-month period from April to December 2010 and is expected to miss the target for 2010-11. Railways has asked finance minister to a budgetary allocation of nearly 39,600 crore to undertake initiatives for modernization of railway infrastructure and augmenting passenger services.
Seeing a strong demand in all its segments with 25 percent YTD volume growth, the Indian automobile sector has seen many new entrants lately. An increase in excise duties by 150-200 basis points is expected with an increase in duties on diesel vehicles. This move might impact the volumes of Diesel vehicles negatively. The need for technology upgradation and development funds has been brought to the government's notice but is unlikely to have a positive result at the budget. The increasing rate of crude oil due to the Arab unrest will put the finance minister to test and another increase on the oil prices won't be a surprise.
Infrastructure development being the key to future economic growth and to attain 8-10 percent GDP growth, investments in infrastructure will be given topmost importance through dedicated debt funds. However, tax breaks and tax reliefs for infrastructural projects are unlikely to be present in the budget. The gap between infrastructure targets and achievements is widening mainly due to slow execution and lack of funding. The sector needs to focus on enabling and creating an environment for raising capital and project development.
The government expenditure on education has been at 1,89,325 core in 2008-09 which is around 11.6 percent of the whole government spending and the sector demands more funds for higher education. The the National Knowledge Commission demands that the government support for higher education should be at least 1.5 percent from a total of 6 percent of GDP for education. The net enrolling ratio of students in the government schools have decreased drastically. More funds are needed for basic infrastructural developments in elementary schools such as to build boundary walls, separate toilets etc. In order to properly implement the Right To Education Act, spending should be increased in this level so that every child between 6 to 14 years gets good education.
Indian Information Technology sector has high hopes on the coming budget. The demand for IT export is ever growing and is expected to touch $59 billion out of the $76 billion software industry. The industry requests income tax exemption on profits of export-oriented units be extended for one more year. The industry also asks the government to reduce the MAT rate back to 15 percent to have more cash flow. Issues like VAT and service tax on purchase of software, service tax issues for SEZ units and TDS on purchase of software are some of the other concerns the IT industry hopes the finance minister will address during the budget.
The banking industry will need an increased attention now with serious issues such as elevated price levels, delayed deposit growth, liquidity crunch and pressure of sustaining of margins are causing challenges. Increase in deduction from income for the amount set aside for covering bad and doubtful debts to 50 percent from 7.5 percent, permission to issue tax-rebated infra bonds, raising FDI limit in insurance sector to 49 percent, and tax break on long tenor deposits are some of the expected reforms with the budget for the banking sector.
Agriculture and rural development is expected to get the most attraction in the budget. Efforts to bring down the rising prices will be gaining the most importance in the budget. Positive measures are needed in the agri inputs sector as well. Budget will move aside a significant amount for rural development.