By Piruz Khambhata, Ahmedabad, 16 March, 2012

As expected neither here nor there budget and a plethora of missed opportunities which are coming in the way of India becoming a developed nation and achieving higher growth.

I do not believe fiscal deficit can be controlled by increasing more tax if that is the intention.

There is a big need to keep taxes at the same level and in fact lower them but increase in tax will only lead to increase in inflation, slowing down consumption, slowing down growth. Government need to work for the growth which will come with huge amount of reforms especially in the manufacturing sector.

It was necessary for the government to ensure that depreciation limits are raised, investment allowance is brought back, exports are boosted by fiscal incentive, labour reforms, decrease in electricity duty, SME sector boosted through higher exemption which has not happened.

Increase in service tax from 10% to 12% is also a negative step as it will increase cost of most of the services and add to inflation. Also exemption limit has not been increased in service tax as Rs.10.0 lacs is a meager amount, cost of collecting tax would be much higher.

It is well known that corporate and HNI are able to significantly contribute to the governments agenda of inclusive growth by CSR activities. To give them a boost it was required that deductions are increased and other incentives are given for such CSR activities which has not happened.

Focus on infrastructure in the budget is laudable, more easier private public sector participation being encouraged can be a boost. Similarly focus on agriculture infrastructure be it cold chain in agriculture, easier finance for the sector or lower customs duty is also highly welcome. National mission for food processing is also a welcome step. So is also higher deduction for R&D and skill development.

Though there was urgent need to exempt food processing completely from taxes and treated it at par with agriculture government has chosen to increase taxes which is counterproductive to the development of agriculture.

In sum and substance this budget carries on the government’s approach of two steps forward and three steps backward which is being seen since last few years.

(Shri Khambhata is Chairman, Rasna PVT.LTD. He is also Chairman of CII National Committee on Food Processing, and past president of All India Food Processors Association.)