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The Rediff Budget Special Chat

Krish: Yes, but on two conditions. 1) That revenue buoyancy will more than make up for reduction in tax rates 2) Infrastructure bottlenecks will not throttle industrial growth.

Krish: Mr Chidambaram has done his homework properly and rest assured that whatever he has said, he means it. By and large, the deficit will be within this limit.

Krish : I share your scepticism about the size of the deficit. Actually Mr. Chidambaram has said that fiscal deficit next year will be 4.5%. Somehow this does not seem to be possible unless the experts who have calculated deficit and other figures have juggled their sums.

Sandeep: Yes, the budget is reform friendly for corporates and the stock market. And therefore I suspect for NRIs like you. But it is not friendly for those who are hoping to see bold decisions in the opening up of the insurance and pension funds sectors that would go a long way in funding infrastructure requirements. When you arrive next time and are disappointed with the airport and the bad roads maybe you will also think that the Budget is not so reform friendly!

Venkat: The finance minister has mentioned that full convertibility both on capital account and current account is expected soon, maybe in the coming year. As regards the trading in the stock exchange, the information of one hour back is that the market has become bullish on account of this Budget. Dividends in the hands of shareholders will not be taxed, nominations on shares will now be permitted, income on shares up to a certain value will not be part of income tax.

Venkat: As far as I can see that the tax policy for the next year for NRIs remains unchanged about making the rupee fully convertible Mr Chidambaram has said that he is appointing a committe of experts under the Reserve Bank to analyse this issue of convertibility on capital account and work out modalities for action.

V Gopalswamy: yes, it will for the following reasons. 1) Corporate tax rates have come down 2) Withholding tax on royalty payments as well as payments for technology transfers have come down from 30% to 20%. This makes it more attractive for joint ventures now than before the Budget.

Tara Shankar: So far as the trade policy is concerned, this is going to be announced on April 1. We expect that consumer items will be liberally allowed to be imported, custom duty will be reduced on capital goods required for export, procedures under duty exemption scheme will be simplified, deemed export benefits will be strengthened, Minimum Alternate Tax has already been removed on exports.

Abhishek: The FM hopes that by reducing taxes, the economy will grow faster. That will give a larger base on which to collect more taxes. That is where he hopes to get extra money from.

Mayank: Yes, I am hopeful, the finance minister in his budget speech also mentioned this. He has already shown the way for full convertibility on capital account when he has permitted utilisation of the dollar account upto $ 15 million without any permission.

Abhishek : It is obvious from Mr. Chidabaram's speech that his mnistry is paying a lot of attentions to PSUs He has listed 7 PSUs which are profit making units and have the potential to become global companies. These units will be given more autonomy so that they can be freed from govt interference in their day to day working He has also announced that those units which are beyond hope will have to jettisoned.

Manish: The government does not have any special packages for foreign companies as distinct from Indian companies getting into new projects in India.

Abhishek: The finance minister has agreed to provide autonomy to public sector undertakings. The recommendations of the disinvestment commission on 3 companies has already been accepted by the finance minister. Oil exploration, both in the public sector and the private sector, will have equal benefits.

Tej: Today, he has permitted the benefit of income tax both to men and women, which was earlier available exclusively only to working women.

Ajay Viadyar: To the extent that allocations for poverty alleviation have been increased such as rozgar yojana etc you can say that the Budget is pro-poor. But if you take the overall impact of the Budget on the economy I doubt whether you can describe the Budget as pro- poor. Firstly, the finance minister has said nothing about inflation which I think will be quite high next year and inflation and poverty are so closely interlinked that all the anti-poverty programmes will be of no use in the face of rising prices.

Ian Fernandes: The answer is a partly yes. The provisions on corporate, personal, direct and indirect taxation have significantly improved the mood of the corporates and the stock market. This upswing in mood is very likely to positively affect industrial production and economic activity. On the negative side, the side stepping of issues relating to the well recognised crisis on infrastructure could actually throttle increase in economic activity.

Ganesh: NRIs setting up their ventures in India are entitled to tax holidays. Those are already in the business, their rate of income tax has been reduced by 50 per cent of the present rate. The venture in oil exploration, oil refineries and other infrastructure ventures will be exempted from custom duties in case you want to import the capital goods. Custom duties have been slashed both on raw material components and capital goods.

Vijay: In a sense you are correct. There is a jargon for this and it is called revenue buoyancy.

ED: There is no direct connection between convertibility and inflation provided you are good at financial management. As you know most European currencies are freely convertible as is the US dollar and the Japanese yen but inflation in these countries is very low, between 1 and 4% .

T Sunder Aiyar: He has done away with MAT on exports. So far as MAT on local industry is concerned, he has changed the conversion formula which may be helpful to the Indian industry. Moreover, other benefits like the removal of surcharge, reduction in corporate taxes will compensate them if they are not very happy on account of MAT.

Abhishek: The FM has not outlined any clear plans but his Budget speech refers to 9 top line PSUs which he hopes to take to global standards. He has called them the Navratnas in the budget speech. As far as I can remember these includes Indian Oil, Bharat Petroleum, Steel Authority of India, Bharat Heavy Electricals, Hindustan Petroleum, ONGC.

Tej: If there is an agreement on double taxation, no tax will be charged in India. Investment in certain sectors will be tax free.

Mr Swarup Saxena: The Budget is certainly good for the stock market as it meets most of the demands of the market. The tax on dividends has been abolished along with the surcharge on corporate profits. The corporate tax slabs have been reduced along with tax rates on personal tax There are also substantial reductions on customs and excise duties. All these measures and concessions should help the corporate sector and thus the stock market.

Vinod Kumar Sinha: I think he will be able to keep his promises if he intellegently packages the announcements in a manner seen as pro-poor by the Left parties.

Amrit: So far as the petro-hike is concerned, it has to come eventually as there is already a deficit of Rs 180 billion on account of the cesspool. If not today, a hike in petrol will have to come sooner or later.

Abhishek: we are ready for full convertibility on capital account. And I'm sure it will strengthen the Indian economy with removal of FERA which is the first step, full convertibility is going to be the next step.

S M Jain: Multinationals should react positively as India is definitely moving to taxation standards acceptable to more developed economies.

On the oil pool deficit: The oil pool deficit does not really fall in the purview of the finance ministry but the deficit is so high -- about Rs 180 billion -- that there is no doubt that refined petroleum products prices will have to be raised in the very near future, possibly immediately after the Budget session of Parliament. That will give a further push to inflation.

Abhishek: The implications could be very serious if not properly not planned and thought through. If Forex reserves are low and there is a demand for hard currency, the rupee could weaken significantly affecting the economy. This could lead to flight of capital of the kind that happened in Mexico. The economy is then left in shambles. Therefore, we should not just hurry with full capital account convertibility.

EVERYONE: Thank you, for your questions and your keen interest in what is happening in your motherland.

Ed: It is precisely because of fear of devaluation of the rupee following full convertibility that the finance minister is cautious about taking such a step. It is possible that with exports going up and the current account deficit stabilised at 2% of GDP and with greater FDI flows the position will be stabilised and devaluation if any will be marginal .

B: I do not know what u mean by as "good" a job. If you think that Dr Manmohan Singh has been so wonderful, why is it that his party for which he was the main economic spokesman was routed so miserably in all the recent elections? In Bombay Dr Singh's party has lost 3 elections in a row. Mr Chidambaram's maiden budget last year was a disaster. It disrupted industry , fuelled inflation and send exports crashing. It might happen again.

J Shyam: NRIs are certainly important and have their place, but you must not forget that Indian budgets are ultimately designed for Indians and not for NRIs.

Mayank: Households in metros who own their house, have a car and a telephone, and have travelled abroad last year will be obliged to file tax returns from now on. All such households will be brought under the tax net.

Ken: As far as I remember Dr Singh also offered an amnesty to tax dodgers. Mr C calls it a voluntary disclosure scheme. But my gut feel is that the black money problem is much more complex than can be tackled by such simplistic measures.

Kailash Nath: Somehow I don't think Chidambaram's budget is as superb as you think it is There is very little in it for the common man.

Abhishek : As far as the Left parties are concerned u will see their reaction very soon and I doubt whether they will be very enthusiastic about it. The Congress only makes a show of being pro-reform. I understand that it has asked Dr Singh to lie low because it suspects that his pro-reform Budgets were responsible for the party's downfall.

Thank you all. This is the first time I have interacted with you on the Internet for which I am very grateful.. GOOD NIGHT....BYE

Photographs: Atul Chowdhary