Budget puts no burden on industry, says FM

Addressing the corporates’ unhappiness over no reduction on corporate tax, Chidambaram said, “The effective corporate tax rate is still 19.2 per cent. The FBT (fringe benefits tax) of 5 per cent works out to be 1 per cent of this effective tax rate.”

Referring to the hike in dividend distribution tax to 15 per cent, he said, “It is not a huge burden on anybody. However, those who have an income more than Rs 5 lakh would have to pay little extra tax.”

Chidamabaram said inflation could be moderated through fiscal steps like duty cuts announced in the Budget yesterday, monetary steps undertaken by RBI and supply side improvements.

Later, talking to a news channel, he said he made a “trade off” between economic growth and inflation in the budget but “9 per cent growth alone can not be the reason for a 6 per cent inflation”.

“The supply side constraints are a major factor,” he said. Responding to a question if Congress can win elections on high growth, he said, “One cannot win elections by Budget promises… Good economics was good politics.”

CII president and Ashok Leyland MD R Seshasayee said that the budget does not talk about reforms. On Employee Stock Option Plans (ESOPs) being brought into the FBT net he said, the problem is with the very concept of FBT. We are willing to put up with 1 per cent additional corporate tax for the sake of revenue but FBT is illogical.

Global rating agency Standard & Poor’s today said that the budget reflects the ongoing efforts toward fiscal consolidation. “The latest budget looks to have struck a balance between fiscal consolidation and the need to spend, especially in key areas such as agriculture, the rural economy, and social services,” the US-based firm said.

S&P had recently upgraded India’s rating to the investment grade (foreign currency BBB-/Stable/A-3; local currency BBB-/Stable/A-3).