Union Budget 2012: Another Cause for Inflation ?

Union Budget 2012 is a damp squid for the masses. Just to save Rs. 4,500 crores from direct Taxes, it has scaled the indirect taxes past Rs 45,000 for the masses. The self proclaimed prophesy of economic development is unfortunately a lie.

No doubt the “age old” slab has been twisted a bit. The same old 10%, 20%, 30% slab still continues to haunt the investors. No doubt the limit has been raised  from 1.8 lakhs to 2 lakhs but one cannot be oblivion of the fact that the benefit in real terms has been dangerously low. This is not an overstatement! All monthly bills and purchase will cost 2% more due to increase in the service tax from 10% to 12%. If I am not mistaken then this service tax is applicable to “nearly” all products and services. Subsequently, the prices of these products will be passed on to the masses. The rise in 2% is a minimum rise I am talking about. The spiral effect is till being ignored (rise in prices that make take places at each stage of value additions made).

During the historic year 2011-2012, consumers have seen the inflationary pressure. Subsequently, there was lot of expectation on some relief to tame the inflation from Budget 2012. Unfortunately, the budget has been itself a cause of inflation. Increase in service tax will have cost-push inflation in a scenario where the margins of retailers are wafer-thin. This will have a set back not only to the customers but also to the industry as a whole.

The whole point that immediately needs to be addressed is has the budget come up with anti-inflationary pressure it has created. Products from essential goods to commodities, from luxury to investment products have all been raised just to appease the exchequer. It’s a slow poison and is detrimental to the growth of the country. It has already set alarm to the retailers and consumers who have lost faith in the Budget.

This is a guest post by Mr. Mitesh Agarwal, BBA & MBA (Finance). Currently working as Financial Analyst with a leading firm in Mumbai.

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