Swot Analysis

Union Budget 2007-08 SWOT Analysis

(Strengths ~ Weaknesses ~ Opportunities ~ Threats) Strengths • With the proposed cuts in customs for Edible Oils, Food processing machinery, Cement and steel it is a clear indication that the budget was aimed at cutting prices, to control inflation. • The exemption limit has been raised by Rs 10,000 to Rs 1,10,000, For women its Rs 1,45,000and for Senior citizens the limit is Rs 1,95,000. • The exemption limit on bank cash transaction tax has been increased to Rs 50,000. • Levied a 1% increase in educational cess, on all taxes used to fund secondary education. • The whole system of reduction of custom and excise duties would also strengthen the anti-inflationary bias of the budget. • Things like Television sets, Cell Phones, refrigerators, coffee, medical equipment, footwear have become cheaper. • The tax-payer as it proposes to deduct interest paid on loans taken for education of children or spouse from the taxable income. The amendment in Section 80E of the Income Tax Act, as proposed in the budget, would expand the scope of those availing of this benefit. • A 30% increase in tax collection is outstanding and shows the importance of good governance in tax administration. • For the reduction in fiscal deficit to less than the target, reduction in revenue deficit and the overall better management of expenditure for fiscal 2007, the finance minister deserves our kudos. Weaknesses • The Government has failed to deliver resources to warrant its rhetoric that the budget serves the cause of the crisis-ridden peasantry, the working people and the poor. • Failed to seriously address the problems of unemployment and inflation and did not exploit the many opportunities for additional resource mobilisation, especially by taxing the rich whose income shares have increased. • Goods like motorcycles, tea, cars, softwares, cigarettes, pulses and grains have become costlier. • The budget failed to address the woes of farmers committing suicides and failed to allocate resources to the affected. • Lack of structural changes in indirect taxes, particularly in excise duties, is glaring. Indirect taxes make up 24-30% of the total taxes on goods in India. • Hike in the rate of dividend distribution tax and increase in the surcharge on corporate taxes are obviously not needed at a time when corporate tax collections have grown by 40%. This may set back corporate tax collection in the future.

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On the FBT front, it seems that only one side of the equation has been studied FBT is proposed to be levied on exercising stock options while the same is not tax-deductible for the employer. The industry will indeed be hurt by these measures as it goes against the idea of employee ownership.

Opportunities • The increase in the allocation for Bharat Nirman by 32%, for education by 34%, and health and family welfare by 22% are good. • There is a thrust on arresting the drop-out ratio, strengthening teacher training institutions, constructing 500,000 more classrooms, and appointing 200,000 more teachers. • The increased outlay on the social sector in terms of water supply, irrigation and other areas, and focus on the agriculture sector is good for India. • The 'Aam Aadmi Bima Yojana' scheme for providing death and disability insurance cover for the rural landless. This is a step in the right direction and will provide social security for our masses. We hope to see much more in this area.

Threats • Proper usage to tax money collected. •