Budget of Small Things

I look at the budget purely from the lens of Consumption. To me consumption equals to development and from that point of view this budget is a mixed bag of announcements for me. I believe the government’s intention was quite positive but it had to walk on a tightrope, juggling between social and economic reforms at the same time.

I saw various measures in this budget that would help the consumption and in turn the development. Announcements like increasing the limit of deduction for health insurance premium and increase in the deduction for rent paid for people living in the rented houses is going to increase the monthly disposable income. Not only this, I am glad that the Service Tax slabs remained unchanged as it would have added pressure on the services industry and spending of the common man.

Announcements about the steps to simplify taxation and curtailing Black Money in the system, is also something I feel positive about. Especially the efforts that the government has taken to increase the transparency in the taxation system will go a long way in creating a positive outlook that the taxpayers have for taxation.

The announcements also showed government’s focus in strengthening the rural economy. Various measures taken to ensure the security of farmers, doubling their income and providing employment to rural youth will further expand the consumption net and have long-term positive impact.

Allowing 100% FDI through FIPB for the marketing of food products produced and manufactured in India is a welcome step and it would encourage investment in food business in India.

While I see quite a few positives in this budget, I see one announcement that can prove to be a dampener. Making PAN mandatory for any purchases above one lakh rupees is going to have a serious impact on consumption. Not more than 13 percent of Indians have PAN card and only about 4 percent of them pay Income Tax. Without expanding the PAN and Income Tax net, a move like this will enormously hamper the consumption space. I expect its significant impact on retailing as well as on manufacturing, especially of Consumer Durable products like televisions, gadgets, furniture and other home products.

I believe it is a positive change but we should give ore time to our society to adopt these changes.

Overall I see this budget as a mixed bag of multiple things with a common direction.

(This article is authored by Kishore Biyani, Founder-CEO, Future Group)

Image credit: Indiatimes