Union Finance Minister P. Chidambaram has presented an astute budget. He has unveiled a remarkably sophisticated strategy for achieving the twin objectives of growth and equity. The budget should be hailed for pushing the NCMP agenda. It has carefully done nothing that can damage the growing momentum of the reform process.
The budget is seemingly good because there is no increase in personal income tax. But the Finance Minister has widened the service tax net, making more services taxable. Ultimately, the common man will have to bear the brunt of service tax.
With income tax at 33.6 per cent on the net, service tax at 12.24 per cent on the gross, and FBT on almost all the expenses incurred, we can very well see the organisations in the services sector increasing the cost of their services several fold, which will have a cascading effect on the common man.
The Finance Minister has used small fish no new taxes to catch the big fish, increase in service tax.
Huge outlays for infrastructure show the active voter can force a Government to orient its policies towards his actual needs bijli, sadak, pani, etc. Good politics seems to be turning into good economics.