Pragmatic, with few surprises

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Some major policy initiatives such as freeing coal reserves for captive allocation for power, fertiliser and steel units will go a long way in improving our competitiveness.

Prashant Ruia

The Finance Minister has presented a positive and pragmatic Budget and one with very few surprises. The planned allocation has been stepped up by 20.4 per cent and most of the increased allocation is going for projects such as Bharat Nirman, irrigation, drinking water, etc. These investments are likely to increase the demand for manufacturing products such as steel, and cement and end use products such as cars, consumer durables etc.

The Budget has addressed the inverted duty structure faced by many industries such as steel, chemicals and paper, etc. The decision to impose a 4 per cent CVD on imported products provides a level playing field for domestic manufacturers.

Some major policy initiatives such as freeing the coal reserves for captive allocation for power, fertiliser and steel units will go a long way in improving our competitiveness. The Government's commitment to encourage investment in refining, pipeline and green fuel projects is a step in the right direction for ensuring energy security for the country.

However, a lot more needs to be done in this regard as a strong energy sector is of strategic importance to the country in order to enable it to maintain its fast rates of growth.

The Budget is high on intentions but what remains to be seen is how well these intentions are actually followed on the ground. The Budget already seems relatively modest on carrying out direly needed Next Generation reforms.

By reducing the peak duty from 15 per cent o 12.5 per cent, India is comparable to the ASEAN tariff levels. However, this is without any backup in the form of enabling domestic reforms.

The industry expected some far-reaching reforms, such as policy to commit natural resources to domestic manufacturers; financial sector reforms to maintain low interest rate regime; freeing up Indian companies to access global capital/debt market without end use restrictions in order to make available international capital for investments; taxation reforms to reduce transaction costs and incidence of taxation; de-reservation of items reserved for Small Scale Industry and labour reforms from this Budget. However, these have not really come about. No major measures have been announced to improve India's export performance.

We hope the Finance Minister will revisit some of these areas and address the genuine interests of the industry to truly make India a global hub for both manufacturing and services.

(The author is Director, Essar Group.)

(This article was published in the Business Line print edition dated March 1, 2006)
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