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Posted on Feb 27, 07:12PM | IBNS
New Delhi, Feb 27 : As Finance Minister P Chidambaram gives the finishing touches to the Union Budget for 2013-14, the Indian industry is holding its breath anxious whether it will face any new taxes at a time when the economy instead needs a booster dose for growth, an ASSOCHAM quick poll indicated.
It would be unrealistic to expect a "big bang" Budget from the Finance Minister as he does not have much an elbow room, given the precarious state of fiscal, not supported by growth.
"Tax revenues are not likely to show big rise in the wake of modest economic expansion. The only option before the government is to cut expenditures to get back to the fiscal discipline over which there are no choices available," said the poll report.
It said amidst debate on the so-called super-rich tax and inheritance tax, India Inc faced a lot more uncertainty about the Budget this year than in the last few years.
"It looked as if the idea of super -rich tax or inheritance tax could have been floated as a trial balloon in some quarters to gauge some reaction. However, it has ended up creating uncertainty and anxiety," ASSOCHAM poll report said.
It is not as if those at the top end of earnings do not want to part with some resources for the national good, the trouble is that there are collateral issues like cost of compliance.
Besides, it should be carefully studied whether the new taxes are worth the administrative efforts in terms of its potential for revenue generation.
Instead, the pollsters suggested that a great push is required to move towards implementation of the Goods and Services Tax without further loss of time. Whatever differences are there with the state governments and opposition parties, must be resolved so that the economy gets a much more efficient tax administration and the consumer is left with more resources to spend.
At the pure expectation level, surprisingly "there are not huge expectations unlike in the past when the scope for tinkering was possible".
At some level, there is also this anxiety whether Chidambaram will be able to stand up to a huge political pressure from the Congress Party and other UPA allies to go in for big time social schemes in the run -up to the 2014 general elections.
It was in this context that the stock market reaction was taken yesterday. The recent stock market rally, as is well-analysed, did not come on the back of great economic fundamentals but thanks to greater liquidity coming from the global sources, mostly the US.
"It cannot go on forever and, therefore, we need to get our own house in order," said chamber president Rajkumar N Dhoot.
He said the trouble is that the entire economy is faced with a situation where the costs are rising in most of the areas where they are bound to face consumer resistance which will in turn lead to further slowing of the demand.
"That situation has to be avoided in any case," Dhoot said.
He also said that the government must cut wasteful expenditure and instead restore investor confidence by clearing some of the long-pending infrastructure projects so that the economy gets pump-primed again.
At the sectoral level, exports need the most urgent help since they are facing a peculiar situation. Ordinarily, currency depreciation should help exports. However, "we are not able to reverse the export deceleration in spite of rupee depreciation," the report noted.
Then, there are several other sectors which are under heavy debts and are over-leveraged. These include real estate, telecom and infrastructure.
"A few years ago, telecom was flouted as a success story. Today, it is in the middle of uncertainty. Power sector continues to be in bad shape and there are several companies in the infrastructure space which have bleeding balance-sheets," the report said.
The big question is whether the Budget will be able to address their concerns and turn the tide, the respondents wondered.