Expanding tax bracket could also help easing inflation!

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Expanding tax bracket could also help easing inflation!
High interest rates seen around Indian banks during the past two years were aimed at reducing inflation in India. RBI raised interest rates 13 times consecutively in past two years.

However as the budget comes closer, there is a chance with the government to contribute to the efforts of RBI. One option could be to catch more manufactured items under tax bracket so as to rein in the fiscal burden and hence give some room to the RBI to start reversing the rate cycle.

RBI, has many a times signaled the reversal of interest rates soon, but has always feared of the rising government expenditures to spoil all the efforts that have been taken to reduce the inflation.

Indian government had extended stimulus packages of around Rs 1.8 trillion to various industries after the crisis of 2008, mainly via tax exemptions. But since then, only a part of them have been rolled back.

For instance, the government could raise the excise duties in the upcoming budget that could contribute significantly in raising the tax-to-GDP ratio of India which has fallen to around 10 per cent from 12 per cent during initial phase of 2008.

Read more about: tax, inflation, gdp, union budget 2012
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