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A pragmatic Budget given the tough economic realities: Meera Sanyal on Budget 2013

IBNLive.com
Mar 01, 2013 at 06:10pm IST

Is the Income Tax surcharge on the super-rich the right way? Meera Sanyal, Country Executive India, Royal Bank of Scotland Group (RBS Group), joined IBNLive readers for an interaction on the issue.

Q. Can the FM not order RBI to reduce borrowing costs and damn inflation? Asked by: sri

A pragmatic Budget given the tough economic realities: Meera Sanyal on Budget 2013

Is the Income Tax surcharge on the super-rich the right way?

A. No it would not be prudent for the FM to influence the RBI to reduce Interest rates to lower borrowing costs. The regulator must have the independence of managing the Monetary Policy with the objective of controlling inflation.

Q. Does it make sense to have the highest slab equivalent to European countries like UK, Sweden etc(40 per cent+). Asked by: vineet jawa

A. I do not believe so. High tax rates invariably dis-incentivise tax compliance. A better way forward is to reduce inefficiencies in our existing tax system.

Q. Has coalition compulsions limited reforms? Asked by: Nivedita

A. Yes - it does appear so. That said, the government has recently taken some bold measures e.g. curtailing fuel subsidies.

Q. Why is banking sector being recapitalised. Where is their money gone. NPA's? Asked by: kp

A. The new capital norms under Basle III is one reason. But it is also true that NPA's in the banking sector have risen - as at Sept 12, NPA's were estimated at 3.5 per cent of total advances.

Q. Is it okay for an FM to say placatingly, "It is just for one year, a bridge capital" when he has power to widen tax net, tax windfall profits of mining cos and so on? Asked by: Shilpa

A. In fairness to the FM, the economy is in a tight situation with both Fiscal and current account deficits being unsustainably high. Presumably once the Fiscal deficit is under control and growth regains momentum, tax revenues will be more buoyant, which could remove the need for the surcharge.

Q. What will be the impact on interest rates? Asked by: Mary

A. If the Fiscal deficit is controlled, as envisaged, there could be room for monetary easing. The commitment shown by the FM towards fiscal consolidation should give RBI the comfort to ease rates somewhat.

Q. How do you rate the Budget? Asked by: Pawan

A. A pragmatic Budget given the tough economic realities, which has thankfully avoided populism in an election year.

Q. Isn't it amazing and laughable on the part of the finance minister to state that theater only about 42000 people who earn over one crore and would be taxed the surcharge? I think he meant the MP's and MLA and MLC's who could count upto the figure mentioned. Asked by: Anonymous

A. Yes it is indeed a pity that only 42,000 individuals declare their true taxable income!

Q. Will gold rates & inflation come down in near future? Asked by: Harry

A. Inflation is already moderating (in most categories except food) and will hopefully fall further during 2013. As for Gold much will depend on international prices, value of the rupee and physical demand for gold (which is also presently easing). So hopefully the answer to both questions is yes!

Q. The implications of Budget on economy? Asked by: DK

A. The strong commitment towards fiscal consolidation would allow for interest rates to ease and the rupee to stabilise - both of which will be positive for growth.

Q. How do you view the idea of all women bank? Asked by: Kamya

A. I think it is a very good idea. India is still largely under banked - and women particularly in rural areas have difficulty in easily accessing banking services. A bank that focuses on the needs of women and has products and services designed around these needs, should be successful. The Indian banking sector has several talented women leaders who could lead this initiative :)

Q. Why was the stock market down after the Budget? Asked by: Jyoti

A. Yesterday was a bad day for Stock markets globally. Also 3 Q GDP Growth was announced yesterday at 4.5% which was lower than expected. Of course higher taxes and surcharges always have a dampening effect on markets.

Q. Is the Union Budget 2013-14 the right thing for India? Asked by: Sonia

A. It is a continuation of efforts that started last September towards fiscal consolidation and improvement of the Investment climate in the country. Under the present domestic and global challenges these are the right steps to take. Hopefully the measures toward GST and other regulatory reforms mentioned by the FM will also be implemented in 2013.

Q. Is imposition of the Income Tax surcharge on the super-rich the right way? Asked by: laxman

A. While in tough times, it is fair to expect the rich to share the burden, this is one of the easiest ways to generate more tax revenues. This however should not become the norm. What is really required is widening of the tax base, and a reduction of leakages and wasteful expenditure. The hard earned money of honest tax payers must be put to good use.

Q. Is it possible to achieve the fiscal deficit target of 4.8 per cent in 2013-14? Asked by: Bhumish Khudkhudia

A. The measures taken towards curtailing fuel subsidies combined with the revenue buoyancy which could result from pick up in growth should make this possible.

Q. I have a basic question as to why only a paltry number of salaried people pay taxes. why cant the farmers, shopkeepers and others also be made to pay taxes? Even a small kirana owner, Panwala or a small road side tea vendor may be making enough money to be in the taxable bracket/ don't you feel that we need to generate more funds by increase the number of people who need to pay taxes? Asked by: AKS

A. Everyone does pay taxes - albeit indirectly, as these are levied on consumption. However it is true that the tax base must be widened, and people who are currently outside the tax net but have very substantial incomes should be identified and made to pay tax.

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