The Hindu Business Line : Revving up hopes

THE Finance Minister has announced certain far-reaching measures for tax reform and expenditure control, but this budget stands out for its measures to promote investment.

From creating a Special Purpose Vehicle to fund infrastructure, to providing greater flexibility in bank operations, enhancing the scope and allocation of highway development and proposing FDI in pensions, mining and retail, the FM clearly wants to stimulate growth through the creation of assets in the economy.

In this respect, Bharat Nirman imparts a visionary dimension to this budget.

By drawing up a well-defined, long term plan for the development of irrigation, housing, roads, water supply, electricity and telecom for the rural sector, Mr Chidambaram has given a sense of purpose and direction to rural development absent in previous budgets.

The FM has discussed the Urban Renewal Mission for mega cities with renewed vigour, and one hopes this initiative will make headway in the new fiscal.

Tax reform

The budget continues the process of liberalisation through reduction of peak customs duty rates.

Apart from making domestic industry more competitive, this measure will help keep inflation under control.

There has been some positive tinkering with excise, though not as much as the passenger car industry would have liked!

The service tax proposals perhaps offer more scope to raise revenue than is immediately apparent. But one will have to wait for the fine print to confirm this.

The changes in direct taxes should win over the middle class. While going a step forward in implementing the Kelkar recommendations, the modifications in direct tax slabs and exemptions is significant for another reason.

It enables the FM to address grievances over declining returns on savings, without hiking administered interest rates.

The budget proposals indicate improved fiscal health at the Centre. In the absence of any major revenue raising measure or increased plan allocations, it appears that the FM is counting on continued buoyancy in the economy. Perhaps, then, the FM could have done more to reduce expenditure.

The proposal to monitor development schemes and improve delivery mechanism might entail wasteful expenditure, but his proposals to contain food and fertiliser subsidies are half hearted.

Auto hopes

The emphasis on infrastructure, highways and rural development should benefit the automobile industry in the medium term.

The FM has asked passenger car makers to "wait" for an excise cut, perhaps on the premise that the industry is already growing at a rate of 20 per cent. I only hope we are not missing an opportunity.

Euro III norms are placing additional cost burden on the automobile industry and an excise relief would have compensated this. Nevertheless, the industry will continue to try and grow the market.

The budget's promise to scale up technical skills and the ITIs is personally satisfying and will bring tremendous benefits in coming years.

(The author is Managing Director, Maruti Udyog Limited)

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