Leading economists in the country have taken divergent views on government’s move. They gave credit to the finance minister for taking ‘a bold step’ and ‘setting the mood for reforms.’ However, they argued that the individual tax rates for various sectors like aviation, power, hardware and non-farm equipment may not have a positive impact.Terming the measures as ‘positive development’, ICRA chief economist Saumitra Chaudhury said it would help the domestic economy to integrate globally and curb inflation, besides enhancing the merchandise trade, thereby easing pressure on rupee. However, B.B. Bhattacharya of Institute of Economic Growth wondered on the ‘special’ necessity of bringing these measures on the eve of the Budget and said it would add to the already soaring fiscal deficit. ICRIER director Dr Arvind Virmani, said the reduction in custom duty was an appropriate step as it would boost investments. NCAER director-general Suman Bery said the government had undertaken a gamble by cutting taxes. ‘‘Such gambles are necessary for the economy. The reduction in taxes is likely to expand demand to the point that the actual tax revenue will increase,’’ he said. Both Virmani and Bery said the move to have individual tax rates for various sectors may not be good for the economy. ‘‘There should be a uniform and stable rate for all. The reduction of individual tax rates will take us all back to the exemption raj, which is not a very welcome move,’’ Virmani said.Echoing the positive sentiment, Ernst & Young boss Kashi Memani said, ‘‘These are a definite signal of elections now being held earlier.’’As for inflation, PriceWaterhouse Coopers executive director S. Mahavan said nothing concrete can be predicted on the level of inflation. ‘‘The impact of these reductions on inflation is not known, we will have to wait and watch,’’ he added.
