Apnaloan.com CEOs comment on Union Budget 2008-09

At first glance, the finance minister appears to have done enough to enjoy the support of India’s burgeoning urban middle class. The long awaited change in the IT slab with the kind of boldness last displayed in 1997, needs to be commended.

This will clearly lead to substantial tax relief for an income tax payer (tax savings can be as high as Rs. 45,000 per annum in some cases). The decrease in the general Cenvat (excise) rate should also lead to some price stabilisation across the board.

The clarifying amendment to the Income Tax Act on reverse mortgages will enable this very beneficial scheme for senior citizens to finally take off.

Health insurance is still some distance away from being a central political issue in India (unlike in the US). In spite of this, the increasing importance of the health sector is outlined in the various large outlays that includes very ambitious life and health insurance initiatives meant for the poorest of the poor. If properly implemented, this initiative could go a long way toward in reducing mortality rates among the poor and increasing health statistics. For the middle class, the incremental deduction of Rs. 15,000 toward the health insurance of one’s parents is a welcome move.

Now for the flip side. The big Rs.60,000 crore giveaway (supposedly to benefit poor farmers) is the clear preparation for the 2009 elections. Whether it helps the ruling alliance to gain some votes remains to be seen but the impact on the lending system will clearly be bad.

This move is clearly an invitation to default on loans knowing that, come an election year, the government will bail them out. This acts as a huge dampener for honest borrowers who repay their loans in time; and rewards dishonesty.

It is also an invitation to borrowers to take more than ordinarily adventurous positions on agricultural projects knowing well that if they succeed, the gains will be theirs. If the project fails, the government is clearly there to bail them out.

When it is tax payer money that is being used to give away these sops we surely deserve a voice in this decision.

Referring to the proposed Higher Educational Refinance Corporation, the government had proposed to provide education loans at a lower cost during the 2007-2008 budget. The scheme was proposed to be fulfilled by the UPA during the 11th Five-Year Plan. However, this budget seems to throw no further light on these aspects. A fund of Rs 2,500 crore was to have been provided to the corporation during the 11th Five-Year Plan.

The budget presented today talks of an increase in scholarships and the number of universities that students can approach to pursue courses. Jawaharlal Navoday Vidyalaya is to be set in 20 new districts for SC/STs. Indian Institutes Scientific Research (IIScR) are to be set up in Bhopal and Tripura. Three more Indian Institutes of Technology (IIT) will be set up in Bihar, AP, and Rajasthan. It is also proposed that 16 Central universities and 6000 model high schools will be started in this current year.

The Blatant Display of Statutorily Regulated Babudom Sexism award goes to the insertion of Section10 (26AAA) offering exemption to Sikkim subjects on the income derived from sources in Sikkim or from dividend or interest on securities. This section specifies that the exemption will be withdrawn if a Sikkimese woman marries a non- Sikkimese subject. The reverse, should a Sikkimese man marry a non- Sikkimese woman, doesn’t hold. It might be a lot to expect, but maybe, just maybe better sense will prevail and this provision will be dropped or amended to make it equally applicable to both men and women.

If only the huge giveaway of Rs. 60,000 crores had not been made, this would perhaps have been the budget dreams are made of.


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