For business journalists in India, budget time is excitement time. It's like sports journos covering the Olympics. As a newspaper correspondent, I too had my fill of budget-time excitement. But I often wondered why the government must play with the (fiscal) fate of 1 billion Indians every year.
Till today, the Union Budget continues to determine every Indian's "financial" fate in the year to come--will we pay higher income tax, will cars and TV sets become cheaper, will LPG cylinders cost more, will cigarettes cost more...there are so many issues in our lives that clearly depend on the Budget. There is little consistency in our tax regulations.
Instead of simplifying the tax regime, we've seen the introduction of newer taxes--value added tax (VAT), fringe benefit tax (FBT), minimum alternate tax (MAT), securities transaction tax (STT), dividend distribution tax (DDT), etc--making it increasingly complicated to (immediately) understand the impact the Budget would have on our lives.
Let's take the Indian IT-ITES industry, for instance. Most of the demands they have raised in their pre-budget wish-list pertain to the taxes. They have been demanding extension of some tax benefits (under Section 10A and 10B of the Income-Tax Act for units in Software Technology Parks) and some exemptions from the scope of MAT. It has also been seeking amendment to a tax clause (Section 10AA) to eliminate the discriminatory treatment of taxpayers having units located in both Special Economic Zones and the Domestic Tariff Area. Even the FBT (that brings ESOPs or employees stock options and other perquisites under the scanner) has annoyed this industry a great deal.
On the indirect tax front too, the possibility of multiple taxation of packaged software is a matter of serious concern to the IT-ITES sector. Presently, customs duty, service tax as well as VAT are all sought to be imposed on packaged software. This results in the taxation of the same product multiple times by multiple agencies.
While there is little sense in going into the details of these demands, and whether they are legitimate or not (after all, Indian IT can't bank on tax rebates all its life), there are two things that are rather obvious:
• Our tax laws are complicated.
• As a country, we come across as rather 'confused and complex'.
Times haven't been extremely good for the IT industry. The Indian IT-ITES industry has been globally perceived as a threat. Rising xenophobia, anti-outsourcing drives, growing protectionism and the global recession are only making matters worse.
But if India is not an easy place to do business, it will get increasingly difficult to attract investors (a seemingly dwindling breed, the world over).
This year, India Inc is keeping its fingers crossed. It is hoping for a lot of giveaways. And if yesterday's Economic Survey is any indication, probably there should be lots in store for the average Indian and probably every industry that's feeling the heat of recession. And disinvestments in public sector undertakings (PSUs) should also get back into track to bring more funds into the government kitty.
The Economic Survey, presented in the Parliament yesterday, suggests further economic reforms (such as allowing FDI in some sectors).
If indeed the Budget undertakes these "pro-growth" measures on Monday (July 6), these should be left untouched for at least five years. And by "pro-growth" measures I mean steps like:
• Having simpler taxation policies that don't change every year.
• Having simpler norms and procedures for foreign investors.
• Increase in investments in infrastructure (particularly roads and power).
• Disinvestments in PSUs.
• Speedier implementation of e-governance programs.
• Reduce all hurdles that would come in the way of making India a super power by 2020 (for instance, through a better education system, skill building initiatives etc).
• Most importantly, make politicians accountable and punish them for wasting public money. Fiscal responsibility should start with every MLA (member of the legislative assembly), going up to the bigger legislators. Why doesn't any politician go behind bars in India for wasting public money?
After a long time India has seen a 'near majority' government in power. The new government has the opportunity to make this the most critical budget for India. As a country, India needs to give out the message that our policies don't change every year. And that it's easy to do business here. This can only come with consistency in policies; even if that means lesser excitement in the lives of business journalists in the country. I am sure they won't complain.