Tracking Indian budget

Indian finance minister Arun Jaitley presented the 2015-16 Union budget in Lok Sabha on February 28. Think tanks and trade bodies here in Bangladesh have been studying Arun Jaitley's budget proposals as a routine exercise.
In fact, the economic and trade policies of India should be closely watched in Bangladesh. India is the second largest source of Bangladesh's import and one of its leading trade partners. The annual bilateral trade now stands over $6.0 billion.
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) go through the Indian budget from time to time. FBCCI mostly looks at tax structure and fiscal incentives.
The Centre for Policy Dialogue (CPD) monitors and analyses the national budget not only of India but also of Pakistan and Sri Lanka. The CPD made some suggestions to the policymakers during the last few years taking cue from Indian budgets. For instance, Indian has a technology upgradation fund scheme. The CPD has advocated budgetary allocation for similar kind of fund a few years back. It has also suggested some social protection budgetary measures in line with Indian measures.
The Policy Research Institute (PRI) follows and sometime analyses Indian budget.
This year, the National Board of Revenue (NBR) has reviewed Indian budget thoroughly and already prepared a brief report on it. The NBR has found some Indian tax measures worth applying in Bangladesh.
DIFFERENCE IN DESIGN: Having a federal structure, India's central budget, termed as union budget, is the core of the country's overall development and economic expenditure. The states or provinces have to rely on the union budget to finalise their own budgets. Currently, the state share of revenue is fixed at 32 per cent of net tax receipts of the central government. The states, however, have a wider space on development expenditure. The 14th Finance Commission (FFC) of India, headed by former governor of Reserve Bank of India (RBI) Dr Y V Reddy, has already recommended increasing the state share of revenue up to 42 per cent. The union government has accepted the recommendation which is reflected in the proposed union budget for FY'16. This is the first full-year budget of union government led by Prime Minister Narendra Modi. The outgoing FY'15 budget was actually designed in two phases.  An interim budget was presented by the previous finance minister P Chidambaram, in February last year, ahead of Indian general election.  Later in June, new finance minister Arun Jaitley placed the final budget. Indian fiscal year starts on April 01 and ends on March 31.
Overall budget designing in India appears to be more comprehensive and precise than in Bangladesh. For example, Indian budget clearly shows deficit structure with four elements. These are: revenue deficit, effective revenue deficit, fiscal deficit and primary deficit. Revenue deficit indicates excess to revenue expenditure over revenue earning while effective revenue deficit shows the difference between revenue deficit and grants for creation of capita assets. Fiscal deficit is the gap between revenue deficit (with non-debt capital receipts) and the total expenditure (including loans). And primary deficit is result of fiscal deficit minus interest payments.  
The budget deficit in Bangladesh is determined by overall deficit. This is simple but a little bit misleading when a deeper analysis is required. Analysts, therefore, have to calculate different forms of deficits from the budget document.  But, deficit financing is more clearly stated in Bangladesh budget. This is, however, a technical part of budget accounting.
TAX AND TARIFF: On fiscal steps, some areas of Indian budget need to be observed very closely in Bangladesh. The new Indian budget has proposed to reduce the corporate tax rate from existing 30 per cent to 25 per cent within next four years. It gives corporate India a clear signal of mid-term development path.
In Bangladesh, such a proposal could be considered as businesses require policy stability for longer period. Bangladesh has the highest rate of corporate tax in South Asia. A compilation of data by Metropolitan Chamber of Commerce and Industry (MCCI), Dhaka shows that general corporate tax rate is 35 per cent in Bangladesh, 34 per cent in Pakistan, 28 per cent in Sri Lanka, 20 per cent in Nepal and 20 per cent in Afghanistan. Moreover, corporate tax rate in Bangladesh is segmented: the rate for banks, insurance and financial institutions is 42.5 per cent, 45 per cent for mobile phone and cigarette companies (40 per cent for listed ones) and 27.5 per cent for publicly traded companies. On the other hand, India's corporate tax is divided on domestic (30 per cent) and foreign (40 per cent) companies. Thus rationalising corporate tax in Bangladesh is a demand of time.
AREAS TO WATCH:  The proposed Indian budget has offered fiscal incentives to export-oriented sectors some of which compete with Bangladesh in the global market.
The other area is tariff and para-tariff. Although India has allowed tariff-free access to all Bangladeshi products and so there is no scope to impose any customs duty, some para-tariffs could be imposed. Last year India imposed a 12.5 per cent countervailing duty on some Bangladeshi RMG items. This is a kind of trade barrier. This year, Indian jute industry has demanded imposition of countervailing duty on imports of jute goods from Bangladesh. The Indian Jute Mills Association has claimed that the countervailing duty is necessary to adjust 10 per cent subsidy, provided by the Government of Bangladesh for Bangladeshi manufacturers. The budget, however, doesn't propose any such duty.
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