This could have been a defining Budget for India's Finance Minister Pranab Mukherjee. It came at a time when the Congress-led UPA is fighting a serious credibility crisis on all fronts and the team of Manmohan Singh and Pranab Mukherjee, the two key economic architects of the country, have delivered stellar results in the past.
This Budget could have sent out a strong signal to the world that India means business. That the government is serious about its looming fiscal deficit. That policies in India cannot be overturned on a whim. But the budget perhaps added to the anxiety and uncertainty.
The finance minister acknowledged that India's fiscal balance has deteriorated sharply due to burden of subsidies. In the same breath he went on to add that the government will take care of food security for all, even as Mukherjee expressed intent to bring down the government's subsidy burden to be under 2 per cent of GDP.
There was minor tinkering at the edges such as introduction of the New Rajiv Gandhi Equity scheme to allow for 50 per cent deduction to small investors, allowing external commercial borrowings for low-cost housing, clusters for weavers, increase investments in infrastructure through PPP, and infrastructure investment of Rs 50 lakh in 12th Plan.
On the other hand, the finance minister left corporate tax rates unchanged; tweaked personal income tax rates; expanded the service tax net; increased excise on large cars and made reporting of assets held abroad compulsory.
FULL COVERAGE: UNION BUDGET 2012
There was nothing concrete on the Direct Tax Code bill or FDI in multi-brand retail.
There was nothing to indicate a push for reforms. In fact, after the budget, India as an investment destination appears to be even more on a wobbly footing.
The government on Friday proposed legislation that would allow it to retroactively tax overseas transactions in which an underlying Indian asset is transferred to another company.
The government's proposal to amend its tax law retroactively to 1962 is part of the Finance Bill that accompanies the annual budget.
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This legislation could open another chapter of legal and regulatory uncertainty that India has come to be associated with. The recent Supreme Court ruling that Vodafone does not have to pay taxes of over $2 billion on $11 billion deal when it acquired a controlling stake in an Indian telecom firm from Hong Kong's Hutchison Whampoa had come as a relief. It is still not clear whether the government can overturn the Supreme Court's findings. But it does not give out the right signal to international community who are becoming increasingly wary of investing in India.
Well, there was much that the finance minister could have said. But then maybe it would have been better if Mukherjee would have left a lot unsaid.