 | | Pranab Mukherjee quotes Hamlet: 'I must be cruel only to be kind'. In the play Hamlet says this after killing Polonius, his beloved Ophelia's father, mistaking him for his uncle Claudius, who murdered his father and married his mother | New Delhi, March 16: Pranab Mukherjee was mildly kind in the budget as he raised the income tax exemption limit but cruel — some would say too cruel — while putting up excise duty and service tax that could stoke inflation. But, first, the kindness, turning the finance minister's Hamlet quote ("I must be cruel only to be kind") around to match the sequence in which he delivered joy and jolt. The personal tax exemption limit has been raised from Rs 1.8 lakh to Rs 2 lakh to place an additional disposable income of Rs 4,500 crore in the pockets of taxpayers. On the contrary, the 2 per cent excise duty and service tax escalation will burn a Rs 45,940-crore hole in the public's pocket as prices rise while filling the government's. Even the Rs 20,000 higher exemption is somewhat misleading in that Mukherjee has withdrawn the deduction of a similar amount offered on infrastructure bonds. But he introduced another deduction, this time on interest from bank deposits, up to Rs 10,000. Taxpayers earning between Rs 8 lakh and Rs 10 lakh a year will see their burden lowered with the income slab changing to Rs 5-10 lakh from Rs 5-8 lakh in the 20 per cent tax bracket. Volatile through the day, the stock market dropped 210 points with the Bombay sensitive index closing at 17466.20 as several industry leaders expressed disappointment with the budget. Their concern was rooted in the excise duty increase from 10 to 12 per cent and the widening of service tax to cover all but 17 items along with a higher rate of 12 per cent. The excise duty rise, however, is another step to a return to rates before the economic slowdown forced the government to announce a stimulus package. Excise was then cut from 14 to 8 per cent while last year saw a reversal being set in train when the rate was stepped up to 10 per cent. The economy is estimated to expand 6.9 per cent this financial year and the finance minister sees a 7.6 per cent growth rate in the coming year, in the context of which he might not have felt it necessary to continue with the lower excise rates. Ficci president R.V. Kanoria said of the budget: "It is not going to stimulate the economy." B. Muthuraman, his counterpart in the Confederation of Indian Industry, said he was expecting much more, expressing fear that higher excise would push up prices. Inflation is now running at 6.9 per cent and the forecast for the coming year is 6.5, though crude oil prices could make a mockery of the prediction as tensions grow around Iran. In a courageous gamble, Mukherjee has provided Rs 43,580 crore for petroleum subsidy, about Rs 25,000 crore down on the actual for the current year, when it overshot the estimate three times. Either something similar is in store in the coming year or the government is plotting a Dinesh Trivedi rerun in diesel pricing. Prime Minister Manmohan Singh dropped a hint while commenting on Mukherjee's commitment to cutting subsidies to less than 1.7 per cent of the gross domestic product over the next three years. "That is obviously the task which, I think, has required the government to put forward an effective programme for adjusting the prices of petroleum products and adjusting other relevant prices. So we have to bite the bullet. There is no other way in which you can reduce subsidies," he said. But, as Trivedi's move to raise rail fares has shown, allies like Mamata Banerjee will hold a gun to the finance minister's head while he attempts to bite the bullet. Today, however, her party was generous — it called the budget "tolerable". The Opposition BJP described the budget as failing "to lift the sentiment of the economy". The CPM expressed fear that it would further widen the divide between the rich and the poor. It should have had some reasons to be happy but chose to ignore them. For instance, Mukherjee committed the government to making full provision for food security for all once the legislation is passed. He said farm credit would expand by Rs 100,000 crore while he increased the plan outlay for agriculture by 18 per cent. No Congress budget is complete without a scheme or two being named after the party's first family. A giant leap seems to have been made from welfare schemes that have traditionally been blessed with the Nehru-Gandhi cachet to step into the very un-Gandhi-like stock market. We now have a Rajiv Gandhi Equity Savings Scheme that will allow a 50 per cent tax deduction on investment up to Rs 50,000 by those with an annual income of below Rs 10 lakh. Gold-hungry Indians will be disappointed to see customs duty being raised. "I propose to increase basic customs duty on standard gold bars, gold coins of purity exceeding 99.5 per cent and platinum from 2 per cent to 4 per cent and on non-standard gold from 5 per cent to 10 per cent," Mukherjee said. Industry experts see a 3-4 per cent spike in gold prices. Note that tax will be collected at source on purchase in cash of bullion or jewellery in excess of Rs 2 lakh and on transfer of immovable property. Many economists have warned about a developing fiscal nightmare with the burgeoning gap between government revenue and expenditure. Expenditure, mainly on subsidies, pushed the fiscal deficit to 5.9 per cent of the GDP for the current fiscal, way over target. The finance minister swore himself to fiscal consolidation beginning with the 2012-13 budget by proposing to hold the deficit to 5.1 per cent. At this level, the government will need to borrow Rs 479,000 crore from the market, a prospect that prompted ICICI Bank CEO Chanda Kochhar to doubt if interest rates can be lowered. "I am not hopeful that the RBI will be able to cut (interest) rates in April," she said. Industry wants interest rates to be lowered to stimulate investment and growth. Mukherjee said: "The life of a finance minister is difficult." While there will be widespread sympathy for him on this count, perhaps his choice of the quote, "I must be cruel only to be kind", might not have been too wise. Hamlet had said this after stabbing Polonius, mistaking him for Claudius. There is bound to be speculation about who the unfortunate victim of this budget is. But then Mukherjee may well follow up with what Hamlet said next: "Thus bad begins and worse remains behind." | 
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