Anticipating The Budget 2008

Gujarat elections have put down all chances of Congress calling for early polls. Elections in many states are due this year, so the undoubtedly, the Prime Minister and the Finance Minister must be in tremendous pressure to produce a populist budget keeping their political imperatives in mind.

The Indian Government may raise the tax exemption limit to Rs. 1.25lacs this year from the existing Rs. 1.10lakh, but the tax rates are expected to remain the same. Polls are due in Delhi too, and with Delhi having a large number of salaried employees, the Government may try to help them tackle the rise in the food prices. The FM will certainly try to keep the economy rate in somewhere between 8-9% despite the global sluggishness in the US and amidst the appreciating Indian rupee. The Finance Minister’s growth concerns were clear when he suggested that the banks could reduce the interest rates by at least 50 basis points.

The manufacturing, particularly segments like textile and leather, may be of prime concern for the FM, since they were hit by a hike in the interest rates and the rise of the Indian rupee against the US dollar. The spiraling subsidies, which have crossed Rs.100, 000 crores, are another area of concern for the FM. The food prices are attaining new heights across the world and making the conditions worse for India.

The FM is likely to touch upon the measures to increase the Plan allocation to various social sectors. The PM had given a lot of emphasis on Education last year, so the budget is likely to reflect that too. More support for agriculture in terms of irrigation projects can be expanded.

At the Centre, we probably have the best-ever combo of Economists. The Budget 2008 may not relax the tax rates, but it is likely to give some relief by increasing tax exemption limit and providing incentives for the leather and textile industries. To control the inflation rate and maintain, steady growth rate is going to be a challenge for the FM and it remains to be seen how well he handles this challenge in the upcoming Budget 2008.

Rishabh Srivastava