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Summary of the Union Budget for 2001-02

The Union Budget for 2001-02 attempts to accelerate growth through stringent control of non-productive expenditure, rationalisation of subsidies, intensification of infrastructure investment and acceleration of the privatisation process. Presenting the Budget, Finance Minister Yashwant Sinha said Indian economy has continued to exhibit both growth and resilience over the last few years.

Budget Strategy:

-Speeding up of agricultural sector reforms and better management of the food economy.

-Intensification of infrastructure investment, continued reform in the financial sector and capital markets, and deepening of structural reforms through removal of remaining tiresome controls constraining economic activity.

-Human development through better educational opportunities and programmes of social security

-Stringent expenditure control of non-productive expenditure, rationalisation of subsidies and improvement in the quality of government expenditure

-Acceleration of the privatisation process and restructuring of public enterprises.

-Revenue enhancement through widening of the tax base and administration of a fair and equitable tax regime.

-Raising the corpus of NABARD's rural infrastructure development fund by Rs 5 billion to Rs 50 billion, Sinha reduced the interest charges on the fund from 11.5 to 10.5 per cent.

-To boost rural and agriculture development, NABARD would link additional 100,000 self-help group during the year, which will help in providing credit to additional 2 million farm families, Sinha said.

-Credit link subsidy scheme for construction of cold storage for perishable commodities has been extended to rural godowns.

-NABARD will reduce interest rate for funding the storageof crops from 10 per cent to 8.5 per cent.

-Sinha announced Rs 25 billion rural roads programme called Pradhan Mantri Graham Sadak Yojna to provide connectivity of every village with a population of 1000 persons by 2003.

-Referring to infrastructure development, Sinha said government will accelerate reforms in state electricity boards and time-bound programme for installation of 100 per cent metering by December 2001.

-Energy audit would be done at all levels and a specific programme would be launched for reduction and eventual elimination of power theft.

-On financial sector and capital market reforms, the finance minister said a clearing corporation will be set up for further orderly development of money market including government securities market and settlement forex transactions.

-RBI will set up an electronic negotiated dealing system by June 2001 to facilitate transparent electronic bidding in auctions and dealings in government securities on a real time basis.

-RBI will also establish an electronic fund transfer and real time gross settlement system within the next year.

-Sinha said taxation anomalies would be removed to promote sales tax related services (STRIPS), zero-coupon bonds and deep discount bonds.

On banking sector reforms, Sinha announced seven more debt recovery tribunals will be set up this year. He said Banking Services Recruitment Board will be abolished by July 31 or earlier and all banks would have to do all future recruitments by themselves.

-On capital account liberalisation, Indian companies may now invest abroad up to $50 million annually through the automatic route without being subject to the three year profitability conditions.

-Turning to foreign investment, he said the 40 per cent limit in a company under the Portfolio Investment Route by FIIS is being increased to 49 per cent.

-The increase is subject to the condition that foreign investors bring in a minimum of $50 million FDI.

-FDI in Non-Banking Finance Companies would not have to be accompanied with divestment of a minimum of 25 per cent of their holding in the domestic market.

-Companies, which have issued ADRs and GDRs may henceforth make foreign investment upto 100 per cent of these proceeds, up from the current ceiling of 50 per cent.

-Fourteen items related to leather goods, shoes and toys have been dereserved from small scale industries.

-Tax exemption limit has been doubled from Rs 10 million from September 1, 2000 for small-scale sector.

-Loans to the extent of Rs 50 billion would be made available to the small scale sector for five years under the credit link capital subsidy scheme for technology upgradation.

-The allocation for textiles have been enhanced by more than 50 per cent from Rs 4.57 billion to Rs 6.50 billion.

-The provision under Technology Upgradation Fund being raised to Rs 2 billion.

-On structural reforms, the deadline of March 2002 for dismantling of Administered Pricing Mechanism (APM) in the petroleum sector will be adhered to.

-There would be phased decontrol of Urea by April 1, 2006 as recommended by Expenditure Reform Commission.

-The Unit Specific Retention Price Scheme will be replaced by a Group Concession Scheme with effect from April 1, 2001.

-On expenditure management, all requirements of recruitment will be scrutinised to ensure that fresh recruitment is limited to one per cent of total civilian staff strength.

-Postal rates will be revised moderately to contain the rising postal deficit.

Budget 2001
Money

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