Mixed Reactions To Indian Budget

by Lorys Charalambous, Tax-News.com, Cyprus

05 March 2002

Indian Finance Minister Yashwant Sinha has come in for wide swathes of criticism after last week's budget, but on Monday he earned at least some plaudits at a seminar on the implications of the budget. Swaminathan Aiyer, consulting editor, The Economic Times, described the Budget as courageous: "When did you last see subsidies on kerosene and fertilizers?"

However, says Aiyer, the minister despite having announced second generation reforms does not have the necessary wherewithal to push them through: "Sinha needs the support of the Congress to push through each of the reforms. But, the Congress is not in an obliging mood".

"Sinha's way of presenting the Budget was poor. But, the Budget announcements on increasing personal taxes were necessary as the government faced a revenue deficit of around Rs 20,000 crore in this financial year," Aiyer said.

S Madhavan, partner, PricewaterhouseCoopers, said the finance minister has brought in stability and moderation on the indirect tax front. "But, poor packaging and presentation on his part has led to the belief that the taxes were anti-corporate," he said.

Many workers' organisations have slammed the budget. For instance, in Lucknow the State Employees Joint Council (SEJC) terms the budget anti-farmer and anti-employee, and claims the Finance Minister was acting at the behest of foreign economic powers to favour just the richest five per cent of the population.

General secretary Amar Nath Yadav, in a message faxed to Prime Minister Vajpayee and Mr Sinha has demanded the withdrawal of the 'anti-employee' provisions in the budget.

In response to critical comments, Mr Sinha himself on Monday said that the Indian budget is set to become simpler and transparent with the government moving on to a single rate 16 per cent excise duty and only two rates of 10 and 20 per cent customs duty within two years.

At a meeting hosted hosted by Confederation of Indian Industry (CII) in New Delhi, the Minister said: "We will have a transparent Budget with the Part-B constituting only one paragraph or only a one-page document." Sinha said a detailed exercise would be carried out in the next budget to push up excise rates of items enjoying full exemptions and those in the 8% band to the headline rate of 16 per cent. Likewise, government would also try to restrict the number of items at the higher 32% rate, bringing them down to 16%.

Sinha also said the customs duty on all raw material imports would be brought down to 10% in 2004-05 while the import tariff for finished goods would fall to 20%. The minister wants industry to come up with suggestions on how to integrate the rates.

CII president Sanjiv Goenka saw the Budget as being positive and achievable, leading to 6.0% growth.

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