The deal between the Left and the government over allowing 74 per cent FDI in telecom and the revision in EPF rate to 9.5 per cent was only a pointer to the shape of things to come in Finance Minister P. Chidambaram'sBudget to be unveiled on February 28. The Budget would have more of such ?deals? brokered between the Left parties and the UPA combine, both of which pretend to be in conflicting positions. The bottomline is that it is a ?friendly? game between them.The CPM and CPI taking the issue of FDI in telecom to streets is all part of this arrangement which is meant to grab the space of Opposition as well.
The new deals to be done before or on the Budget day, may include allowing FDI?at least 26 per cent in the retail sector, giving liberal sops to the corporate sector with an eye on the Sensex and pleasing the irrational foreign institutional investors, who have gone crazy about the Indian market. Chidambaram might even come out with an understanding with the Left on opening the FDI window for the private banks as well.
What is that the FM would give in turn to the Yechuris and the Bardhans? Well, both the industry and commoners should be ready for levy of a new cess?it could be in the name of tsunami or fuel cess for infrastructure. ?We must aspire to educate, provide healthcare and drinking water to all our people,?? he said, giving indications of a possible levy. The service tax which has already been hiked to the double digit figure by the UPA government from 8 per cent during the NDA government'srule, is in for a further revision, maybe to 12 per cent. That would not be all; many more services would be brought under the service tax net. If the NDMC decision for charging Rs 25 for parking your car in Connaught Place was not enough to pick-pocket you, Chidambaram may make it worse by levying a service tax on the parking coupon. He can go go to any level of absurdity in filling the government kitty and pleasing his Left friends.
Budget would have more of such ?deals? brokered between the Left parties and the UPA combine, both of which pretend to be in conflicting positions.
Chidambaram, in fact, is not averse to the deals. He has proposed one such arrangment to the industry. If he reduces the corporate tax from 35 per cent to 30 per cent, as demanded by the industry, he would do away with all the exemptions. These exemptions average about 7 per cent of the corporate taxes which means the companies are paying an effective tax of 28 per cent. If he reduces the corporate tax from 35 per cent to 30 per cent and gives them no exemption, the industry would end up paying more. But the industry is not as the foolish as Leftists. They can see through the Finance Minister'sgame and are no more pressing for cuts in the corporate tax.
Yet another deal could be with the hoarders of black money. Unable to raise the resources as targetted in his last Budget, Chidambaram could come out with another amnesty scheme for unaccounted money, which God only knows, accounts for what percentage of the economy! The only government report on the subject is 30-year old while the unaccounted money would have claimed the biggest share of the economy. He had come out with a similar scheme in his earlier tenure in North Block. You, as an honest tax-payer, would certainly feel offended but then the FM has something up his sleeve.
If one takes a look at the fiscal situation, one finds the FM has proved to be over-ambitious in projecting the growth figures for both direct and indirect collections. He has not been able to keep any control over the non-plan expenditure and the plan expenditure would have shortfalls. He will surely be doing some financial jugglery to keep the fiscal deficit under the limit of 4.4 per cent of the GDP as set out in the Fiscal Responsibility Law. Perhaps that is why he is not sure how people would react to his Budget. ?I hope I would have as many friends 18 days from now as today,? he commented in his meeting with the members of the International Chambers of Commerce and Industry. His problem is that it is not difficult to see through his deals with the Left and others.The real stakeholder in the economy is becoming wiser by the day.