The Hindu Business Line : No dream effort this

AHEAD OF THE Union Budget, the question corporate heads pondered over was: "Will the Dream Team deliver?" On the evidence of the nearly-two-hour Budget presentation by the Finance Minister, Mr P. Chidambaram, the answer would be, "It has not clicked." The lone measure of note, which got the goat of Parliament and many private sector managers, was the needless 0.1 per cent levy on daily cash withdrawals of Rs 10,000 so as to curb black money; the other measures were taken little note of.

Expectations were driven up even when it was amply clear the Manmohan Singh government could not stretch its elbow, held back by the demands of the Left. Seen that way Mr Chidambaram has gone about keeping the books, adding confidently that "all the engines of the economy are running at nearly full speed." The economy, which grew at 8.5 per cent in 2003-04, has slipped to 6.9 per cent this year but is not far off the 7-8 per cent mandated by the National Common Minimum Programme. The rural idiom of Mr Chidambaram will make sense if funds reach the poor. Much of the rural allocations (some of them repackaged) seems to be extensions from last year with little care shown or studies done on their utilisation; purveying government monies in the rural areas has not come with any efficiency over the years. For instance, the Rural Infrastructure Development Fund has been given an extra Rs 8,000 crore when the Economic Survey admits to sanctions falling way behind disbursements. Bihar has been promised more funds with no questions raised over the poor governance in that State. Possibly, the Rs 72 crore for freeing rural markets will help if firmly linked to States amending the Agricultural Produce Marketing Committee Acts and granting farmers the leeway to sell their produce anywhere.

Corporates and individuals should be content as the direct and indirect tax loads are sparing with the Budget quiet on public sector units disinvestment. That could be the factor behind offering equity support of Rs 14,040 crore and loans of Rs 3,554 crore to PSUs including the Railways. A precedent is being set by New Delhi ordering loan restructuring (principal and interest) at lower interest rates for the sugar industry when that should be a business decision left to bankers and sugar mill owners. Peak import duties have been trimmed to make the domestic sector more efficient and by a rather involved process the tax regime seems to be less burdensome (first impressions) though industry is edgy on the way VAT will roll out from April 1.

Itwas left to the Reserve Bank of India to announce critical banking reforms: lifting the cap on voting rights in banks and allowing a minimum 15 per cent stake-buy by a foreign bank (to go up eventually to 74 per cent) in an Indian private bank identified by the RBI for restructuring. In the event, the foreign bank will, within six months, have to abide by the one-mode criterion (earlier set down) to be either a foreign bank, a wholly-owned subsidiary or a subsidiary with an aggregate foreign investment of up to 74 per cent. Yet, that may not interest foreign banks keen on continuing with their present set up and also picking up majority stake in Indian private banks.

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