Financial Daily from THE HINDU group of publications
Friday, Jul 09, 2004

Cross Currency

Group Sites

Industry & Economy - Budget

A limited first step

Ajit Ranade

THE Finance Minister had said that he would rather be known as the Investment Minister. On this count, his Budget has scored quite a few points. First, it is the setting up of the Investment Commission. For too long, we have had a lot of attention paid on how to induce more FDI (foreign direct investment), but perhaps not enough to DI (domestic investment). In fact, it was the same Finance Minister who had also set up a Disinvestment Commission in 1996.

In the current Budget, however, his support for disinvestment is muted, as the National Common Minimum Programme itself has ruled out privatisation of profitable public sector entities. However, the Finance Minister's announcement of a modest target for disinvestment (Rs 4,000 crore) and the proposal to off-load government equity in NTPC means that disinvestment will continue, albeit much more selectively.

A second investment-friendly measure is the elimination of long-term capital gains tax and the lowering of short-term capital gains tax. It is surprising that the stock market reacted negatively — perhaps an over-reaction, focused too much on the turnover tax and not enough on capital gains. The third investment inducement comes in the form of a slew of tax incentives for investments in R&D and into the rural economy and will induce investments.

Fourth there is the hiking of sectoral limits on FDI in a few sectors, which will attract foreign investors. Fifth is a variety of investment expenditures announced in infrastructure and rural areas. The change of the FIPB from being an approver to a facilitator will also be welcomed by investors.

The Budget had to achieve multiple, and somewhat conflicting objectives. The need to increase social sector spending seems counter to achieving fiscal rectitude. From where will funds come?

Also, the desire to spur growth to 8 per cent and yet achieve an equitable redistribution of this growth also seems difficult to balance.

The Finance Minister had an additional handicap of implementing his Budget in a shortened fiscal year. The Union Budget is increasingly an exercise in expectations management, and much more about implementation than promises.

(The author is Chief Economist, Aditya Birla Group.)

More Stories on : Budget | Disinvestment

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
More bank finance for stock brokers

`Budget is not inflationary' — Transaction tax no impediment to stock market activities
Chidambaram plays the popular tune — Tax breaks for farm sector and lower middle class
Thumbs down by markets
Service tax on transport intermediaries hailed
Adopting the Keynesian route
FDI push on telecom
Shipping industry says `ahoy!'
Mutual funds — Odds stacked against debt funds
Tonnage tax at last for a smooth sailing
Focus on rural housing; tax rebates to stay
Banking on industrial growth
IIG to beef up infrastructure
ONGC, GAIL to carry the can
A rural slant
Power on `line
Govt to facilitate crop diversification
A bitter pill, says pharma sector
Chaos after the wait
At your service, tax!
A progressive budget
Striking a balance
Spurring investments
Continuance of economic reforms
Catch My Point!
Mixed response from India Inc
Move to drop Cenvat may pep up yarn market
'Market pessimism to end soon'
Steps initiated to integrate stock, commodity markets
FDI in aviation capped at 49% — Buying of aircraft to attract tax
Toyota to set up R&D centre in India
0.15 per cent tax to be levied on securities transactions
SPV for Sethusamudram canal project
Insurance FDI limit raised to 49 pc
IDBI gets Rs 9,000 cr to turn zero NPA
In coalition company
Captains of industry give Budget proposals a cautious welcome
Shifting gears
Turnover tax may spook capital gains
RBI sees no Budget trigger for change in rate, inflation outlook
Views from the bottom of a coffee cup
Customs duty cut on metals: Major price impact unlikely
Coop sugar sector needs tax holiday
Water bodies renovation innovative
Transaction tax a dampener: FISE
Modest hike in Central Plan outlays in real terms
Nothing much to glow about
Smooth ride for tractors
No excise duty on dairy machinery
The jam in the Budget
Disinvestment, reborn
Disappointing delivery
Little to build on
Right thrust on crop diversification
Oil and gas — Slickly left alone
3 key areas targeted for 24.6% revenue mop-up
Industry divided on price drop
A taxing scenario for media
Personal finance: Thrust to direct equity investing
A cess to educate
`Back-to-basics' theme
A `neutral-to-negative' exercise: MFs
A mixed bag
Little more buoyant now
Prices static? Not for long
FDI limit hike has insurers smiling — Service tax on risk premium for life cover is a dampener
`More clarity on turnover tax needed'
Sewing up the competition
A lot to cheer about
Turnover tax seen as a blip
Rural sops to get FMCGs going
May impact trading volume: market players
`VAT by 2005, a step in right direction'
Your dream car to become dearer
A limited first step
Consolidation vital
Slip into khadi and morph into a geek
Hindujas interested in desalination project proposal
Budget fails to impress CETMA
`Bold decisions taken on foreign investments'
No impact on gold market; platinum prices may fall
FIPB to fly with clipped wings
Cap for SSI loans raised to Rs 1 cr
A bitter-sweet pill for vegoil sector
Assurance to States on VAT compensation
Service tax hiked to 10 pc; list expanded
An effort to reflect mandate for change
New deal for farmers; more funds for States
Stress on moderation, stability in tax rates
Textiles woven in style
More services annexed at a higher rate
VAT full of promises
Watch out as the government shifts gears and piggybacks
No luck if you cross a `lakh'
Tax admin: Reforms kept in arrears
`No clear theme in the Budget' — Mr Yashwant Sinha, former Finance Minister

The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |

Copyright 2004, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line