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With business confidence high, industry looks forward to a friendly budget

Nikhil Faleiro in Bombay

It's that time of the year when everyone, from the common man to the housewife to the all-important business baron, tries the guessing game as to what the finance minister will announce in the country's budget. The expectations are high. Will income tax rates go down? Will prices of essential commodities be spared? Questions abound.

Praveen Vashishta, managing director, Zurich Risk Management Services (India) Private Limited, says, ``The emphasis obviously should be on reducing fiscal deficit and introducing structural changes for sustained socio-economic growth. The finance minister should spare a thought to the salaried citizens and be sensitive to the concerns of the middle class who bear the brunt.''

Experts say, this year things are looking up for the economy, unlike the previous years when the finance minister had to grapple with sanctions imposed by the US government or with a lacklustre industrial growth rate or even a stockmarket that was declining every day.

But today, the picture is different. Corporate India's confidence in the country's economy and polity is at an unprecedented high. All the key parameters are indicating a strong economic recovery. There are expectations of bold decisions by the finance minister in Budget 2000.

According to a survey conducted by the Federation of Indian Chambers of Commerce and Industry or FICCI, the upbeat mood among Corporate India is due to the unexpected 6.8 per cent growth in gross domestic product which has risen during 1998-99, the dramatic rise in the stock markets with the 30-share Sensex crossing the 6,000 mark recently, strong macro-economic indicators like low inflation, stable foreign exchange reserves and political stability. For instance, the FICCI Business Confidence Index rose from 25.6 points to 27.8 points, a rise of 2.2 per cent.

The survey found that most corporate entities anticipate the government to take bold economic decisions in the budget. Some 80 per cent of the respondents expected divestment of government stake in more public sector undertakings.

The recent decision by the government to sell its stake in Indian Airlines and Modern Foods was an indicator that the government is determined to go ahead with the divestment process. In addition, the government's determination to introduce the Insurance Bill and Broadcasting Bill in Parliament is also a positive sign that the government is determined to go-ahead.

As Pradeep Saxena, MD and CEO, ING Barings, says, ``Central government and public sector units should be made more profitable. Monopolies such as VSNL, MTNL must be asked to provide minimum transfer of funds to the government in order to reduce fiscal deficit. They could be subjected to market discipline, thus reducing favourable treatment. One such area where progress (albeit at a very slow pace) has already been made is making borrowings of such entities from banks and financial institutions subject to commercial terms. Likewise, there can be no rationale for undertakings such as railways, and the posts and telegraph department, to continue to receive budgetary allocations.''

However, nearly 50 per cent of the participants of the survey also felt that with the government being progressive in nature, the government will tax the rural rich. And while 45 per cent of the respondents of the survey anticipate that the government will take a decision on closure of terminally sick companies by putting in place an adequate safety net, 30 per cent of the participants are hopeful that the government will effectively downsize its manpower.

But what has boosted the business confidence is the consensus among political parties for the passage of key economic legislations like the Insurance Bill and Foreign Exchangement Management Act. Expectations are that the government will initiate steps for the passage of other pending bills such as the Companies Amendment Bill, amendment to the Contract Labour Regulation Act and the Patents Bill.

Industry is also bullish that the industrial growth during the current fiscal year would be between 6 and 8 per cent. A higher fiscal deficit at 6 to 7 per cent of the GDP as against the budgeted target of just 4 per cent is also foreseen.

As A P Parigi, CEO, BPL Mobile Communications Limited, sums it up: ``Budget 2000 should be a concrete step to usher in an era of consistent policy-making, increased investments in core sectors, quality workforce and a competitive environment to benefit consumers, the society and the nation as a whole.''

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