Since 1991, out of 18 budgets so far presented in the Parliament, 14 have caused a downturn in the Sensex for above a month – costing crores of rupees to the investors. No doubt the stock markets do not denote the economy of the country as a whole but nonetheless are an indicator of the expectations of the industry/investors at large. At the same time the Finance Minister would have to deliver ‘inclusive growth’, something promised by the Congress government. Given this, the veteran Congress leader Pranab Mukherjee has his task cut out.
Innumerable questions keep on knocking on our minds about what the Finance Minister has in mind. Will he cut taxes; will goods become any cheaper, would infrastructural development be given a fillip?
We try to find answer to these and many more questions here:
The Manmohan Singh government, after the initial hint of the economy being on a revival path, may take some reformist steps. Industry is keeping its fingers crossed on expectations of tax cuts and a even a fourth stimulus package.
Smooth road for auto sector?
Both the industry and the consumer have their eyes fixed on the Finmin on this. Any reduction in the taxes/duty structure will boost demand for automobiles. Almost all the auto makers, two-wheeler makers reported double digit growth in recent months irrespective of the situation abroad due to the slowdown. The underlining reason primarily is the vast rural and urban population and their needs. Indian market is still far from getting saturated.
But concerns remain as auto loans are still considered highly prone to default. With the liquidity crunch still far from over, cheaper and easier loans are necessary to provide liquidity and to boost sales.
Industry players have been asking for interest rate cuts to increase demand, reduction of excise duty differential, which is 8 percent for small cars and 20 percent for all other categories, and scrapping of Central Sales Tax
.
What the Government can do:
The excise duty cut, from 10 percent to 8 percent, may be extended, which will further boost the ailing sector. Though most of firms have reported good sale numbers in recent times in terms of two wheelers, the commercial vehicle segment is still to feel the impact of the duty cut.
Four percent excise cut announced earlier in the stimulus package in December will continue beyond March 31, Finance Minister Pranab Mukherjee had said while winding up the debate on the Interim Budget. Mukherjee may further extend this.
With direct taxes collection coming down, the government will likely to shy away from further excise duty cut.
Great expectations:
The government can go for incentivising customers to scrap old vehicles, in line with policies followed in Germany. This will not only boost the auto market, but will also set the stage for greener technologies. The government could also provide incentive in the form of tax relief for developing green technologies.
Source : Zeenews.com