Priorities for the forthcoming Budget

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: The annual pre-Budget meetings of the finance minister with different stakeholders are by now an integral part of the Budget preparation. While some may question the usefulness of these meetings with trade unionists, agriculturists, industry representatives and economists, for me they represent a necessary consultative process. I have had the privilege of having participated in these meetings from three sides: from the DEA, when as an economic advisor during 1991-95 I had the task of organising some of them; as part of the industry delegation when I was CII’s chief economist (2004-06); and now as an economist heading Icrier. This somewhat unique three-way perspective assures me that finance ministers take these meetings seriously and often use them to crosscheck the efficacy of suggestions. I only wish that better preparations could be made from both sides and the duration of the meetings be increased to three hours instead of the present two. I say this because I have noticed that there is often a lack of response to some simple query raised either by the invited representatives or the minister himself (for example, the actual revenue collection from petroleum taxes and Centre’s share in them), and the time constraint does not permit a full discussion on any specific issue that is raised and on which the minister or senior officials present may need some clarifications or others may have relevant additional inputs.

In this year’s meeting with economists, there was a fair—some would say surprising—degree of agreement among several of those present. Some economists suggested that the finance minister would do well to leave direct income tax rates untouched, and no one opposed it. These collections have shown remarkable buoyancy with increasing gains from better compliance and better third-party information available to the tax authorities. The additional direct tax revenues, it was further suggested, should be used to rationalise—and reduce in some cases like petroleum—the incidence of indirect taxes. Taxes constitute up to 57% of the total price of petroleum products, by far the highest tax imposition on them anywhere in the world. So, in these days of historically high global oil prices that are likely to remain at these levels, it would be worthwhile considering a reduction in these taxes.