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'The Budget makes the Rail Budget feel like a bad dream'

Dr Isher Judge Ahluwalia

This year, the deficit has been on track. For next year, a lower fiscal deficit has been targeted. If this trend continues, we should be beginning the process of correction. We will most certainly not go the Mexico way.

I do not agree with Professor Nanjundaswamy, that the number of people under the poverty line has increased from last year.

We have the National Sample Survey and NCAER survey data telling us that the number of people below the poverty line has declined by 10 per cent between 1987-88 and 1999-2000. This Budget being growth-oriented, it will bring about higher growth this year, which will be good for further reduction in this ratio.

The Union Budget makes the Railway Budget feel like a bad dream. I am happy to be woken up by this Budget.

The fact that Prime Minister Atal Bihari Vajpayee has put his weight behind Balco's privatisation means that the government is definitely very serious. It is going the right way, in a transparent manner. It should achieve at least two-thirds of its target.

We need to address problems of the small-scale sector in the context of increasing competition from imports. The Budget does not provide subsidies to the small-scale sector. In some industries, such as processed foods, it actually encourages the industry, irrespective of scale. This is a sector where earlier the small-scale industry was dominant because of reservations. It will bite in the short run, but the message is to cut costs and become competitive.

We have seen a regime of interest rate deregulation over 10 years. For some reason, small savings rates were administered and kept relatively high. With other interest rates coming down as pressure of government borrowings ease, it was extremely important to make this correction to ensure competitiveness for banks. The decline in interest rates will be good for encouraging investment in the economy.

Downsizing is an area where the finance minister could have done more. I am not fully convinced that he will do what little he has promised. But I am willing to give him the benefit of doubt.

The minister has widened the tax net for services. He has, however, not increased rates. The tax now covers banking and finance, auto, photo and sound recording and telegraph services, which was long overdue.

Economist Dr Isher Judge Ahluwalia is director, ICRIER

Budget 2001

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