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An estimated 2-minute read

Merits and demerits of 2011 Budget and What's for Legal Industry!

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The budget of 2011 presented on 28th February of this year by Finance Minister Pranab Mukherjee was reflection of the economy being back to pre crisis trajectory, marking the growth at 8.6% for 2010-11 and provided blueprint for 9% growth rate in the coming fiscal year.


Merits: The Government efforts of debt management and effective control of fiscal deficit are noteworthy, the roadmap laid to bring down government deficit from existing 5.1% to 4.1% for 2011-12 against 13 Finance Commission’s mandate for 4.8% shows the fiscal prudence of the Government of India. The initiatives of fiscal consolidation, rolling out Direct Tax Code and Goods & Services Tax will provide for Simplification of laws, improvement in collection mechanisms and uniformity in tax structure. The government efforts to concentrate this budget on often neglected sectors, provides this budget to be socially concerned especially in areas such as Microfinance , women self help group, rural infrastructure, self employment and Small Industries. The urban assistance in the form of extending priority sector lending to Rs.25Lacs for housing loans will boost the growth of infrastructure, along with increase in FII for infrastructure bonds are positive factors. The inflationary pressure continues to be troublesome to the Government, the reasons assigned by Finance Minister was perishable goods which constitute 70% of the Wholesale Price Index (WPI), allocation of Rs. 7850 crore under Rashtriya Kisi Vikas Yojna and licensing 30 Mega Food Parks will lead to a new era in Indian Agriculture. The extension of Green Revolution to North – eastern States and allocation of funds for this region are praiseworthy. This budget also provided for doubling the salary of existing Anganwadi workers from Rs.1500 to Rs. 3000. Reaffirming the goal of universalisation of secondary education appears to be effective strategies for the Indian development Mission.


Demerits: This budget provided for the control of fiscal deficit but the governance deficit still remains a concern, the number of central government schemes stand at 200, no efforts are taken to consolidate these schemes for effective implementation and control. Secondly, the transfer of subsidies after the awaited recommendation of Nandan Neilkani’s report will be done only at the end of this fiscal year; therefore it will have no implications in this Fiscal year. Thirdly, No administrative and technical platform was provided for DTC and GST rollout and this budget appears to be only a futuristic budget with all promises and no rewards. 



Budget's effect on legal Industry :

This budget expanded the scope of legal services to include services provided by business entities to individuals as well as representational and arbitration services by individuals to business entities.However, there is no taxation on services by individuals to other individuals. For Legal Consulting firms, the code is that they will have to pay service tax even when the clients are individuals. Invitation to taxation also comes from the Arbitrations.The Service tax will be levied on the tribunal arbitrating for a business entity.


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