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The Rediff Budget Jury/M K Pandhe

'Indian industry will become less competitive'

BUDGET 2000

The Budget will not lead to acclerated economic growth in the country. It will make the economy stagnant and will not lead to elimination of poverty as claimed by the Ministry of Finance.

By reducing the customs duty on imported goods and imposing additional excise duty on Indian commodities, the Budget will only make Indian industry less competitive in Indian as well as foreign markets.

Although the finance ministry has provided additional funds in the rural sector, the benefits will generally go to the rural rich and the poor people in the villages will not be able to get benefit out of it.

Regarding the common people of this country, the Budget has not provided much relief. The prices of essential commodities have already gone up because of increase in the price of LPG gas, deisel, commodities in the public distribution system.

People are finding it difficult to make both ends meet, but the Budget does not provide any relief to them. The refusal of the finance minister to provide any assistance for revival of sick units will only increase the unemployment in the country and loss of productive capacity in several industries.

The income-tax policies are hitting hard the wage earners and salaried employees because the tax is deducted at source. All central trade unions demanded, in the pre-Budget discussions, enhancing the limit to Rs 100,000 but the finance minister did not find any reasonableness in this proposal..

The funds alloted by the finance ministry are only symbolic and the country's progress is held up because of the inadequate power supply. The government is relying mainly on foreign companies to generate power in India which will only make power more costly for the Indian people.

This will also deprive Indian power equipment producer to get adequate market within our own country. The concessions given to the state electricity board in the Budget will not go in a big way to improve the performance of the SEBs.

Although Indian economy is not near the debt trap, it is heading towards that. About 55 per cent of the revenue is meant for interest payments, amortization of debts and this per cent is continuously increasing year by year.

If it exceeds 70 percent of the total revenue, then India will be almost in the debt trap. Same case is applicable to the foreign money borrowed by the Indian government. Most of the loans are rescheduled which is also increased in the burden of repayment.

Therefore, the economy is heading towards a debt trap. The divestment of government stake in public sector banks cannot be a solution to the problem of their sickness. One of the major causes of the bank financial difficulties is the huge non performing assets of the banking industry which has now exceeded Rs 500 billion.

For the weak banks, the government should protect from the NPAs and find some solution to them so that they can improve their performance. Much of the loans given by these sick banks are due to political consideration given by the government. If that is properly checked with cooperation of the bank employees, it is possible to improve the performance of the sick banks.

And to add to that out of these NPAs, about Rs 350 billion are due to non payment of loans by the corporate sector, many of whose assets have increased phenomenoally in the recent past. The recovery tribunals have not been able to realise even a token percentage of bank loans taken by the corporate sector.

The finance minister's speech does not mention anything about the change in the excise duty on steel industry specifically. But frieght increase in the Railway Budget will affect the competitiveness of steel industry.

The stock value of this information technology is increasing in an unrealistic manner. For example, Wipro stock value increased by 10 times in one year alone. It has also been brought to light by some writers that the stock values are manipulated with a view to get speculative gains for stock market operators. This is resulting in a development of a bubble economy in the country which ultimately will face serious crisis when the stock markets crash in the near future.

Although the Budget provided some tax on farmhouses' non-agricultural income, it does not provide any tax provisions for the rich agricultural farmers who are earning quite a substantial amount through agricultural produces. This income, if taxed, can be used for improving the conditions of rural poor which will also reduce the poverty in the rural area.

M K Pandhe is general secretary, Centre for Indian Trade Unions

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