Budget 2013: Balanced Act?
The street opinion is that the Budget seems to have balanced both the populist and reformist measures in order to aid growth in the environment of high inflation. The laid- out plan for spending and fiscal deficit in particular is achievable, believe experts. The FM has indicated to limit 2012-13 fiscal deficit at 5.2% of the GDP while that for 2013-14 is targeted to be contained at 4.8%.
Albeit the intensity of reforms like higher taxes on affluent and corporates for the fiscal 2013-14 and reiteration of stable natural gas pricing policy on the whole remained less impressive. Largely, unchanged, central excise duties and service tax rates were deemed neutral.
While a mention of the GST guidelines was made, no timeline was announced, which disappointed some observers. The disposable income of the larger block of population is not affected , however, the 10%surcharge levied on individuals with income of more than R1 crore, may impact the demand of high end and luxury products. In that context, even the increased import duties on luxury cars and motorcycles are seen abating a portion of the demand.
For corporate India, a similar surcharge of 10% from 5% on domestic companies and 5% from an earlier 2% on MNCs would bring down the earnings by a similar extend for the fiscal 2014. However, what appears to have instigated an apparent reaction is the proposed hike in the withholding tax on royalty and fees for technical services from an earlier 10% to 25%, subject to Double Tax Avoidance
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