'No special policy package to revive capital market'
Dr U Shankar
I think policies such as the
increase in custom duties on steel and cold rolled steel, 25 per cent to 30 per cent on paper and
paper board, are all aimed at helping industries facing recession.
The disappontment is that
there is no special policy package to
revive the capital market to boost
exports.
I think this budget is swadeshi
in the following senses: from public
monoply status, the insurance sector is
opened to private Indian parties, there are special incentives to attract funds
from NRIs, the FM has yielded to the
demand of level-playing field by giving
protection to some of the industries
like steel and paper by increasing the
custom duties.
I think the Budget is pro-farmer and
pro rural -- the allocation on
agriculture, irrigation, water
supply, and housing received a big boost.
It is a continuation of the previous Budget
in the sense that there are no major
changes in direct taxes, the rationale for this continuity is to have a long term
fiscal policy.
There is likely to be an increase in the
prices of manufactured items because
of the ceiling on MODVAT claims to
5 per cent, general increase of 8 per cent in custom
duties and excise duties on many
items. But the price increase will be
modest, maybe 1 or 2 per cent in the
retail price index
There are only two or three announcements to revive industry -- increase in expenditure under many items
particularly plan
expenditure, infrastructure, investmental power and incentives for
housing investment. These policies can
stimulate demand for intermediate
goods like steel and cement.
The boost
for agriculture and rural development
may also generate rural demand for
many agricultural products. But the
corporate sector may be disappointed
because of lack of any new policies to
stimulate the capital market, and the
additional indirect tax burden in the
form of increase in excise and custom
duties.
I think the Budget is less harsh than
what was expected in the context of
India's nuclear tests and the subsequent sanctions
imposed by countries such as the US, Japan
and other developed countries.
The FM
intreprets swadeshi not in the sense of
isolation but in the sense of
self-reliance. He might think that the
sanctions are short-term and
temporary in nature, and that's the
reason why he wants to continue with
the economic reforms, with minor
changes to satisfy the BJP
agenda.
Dr U Shankar, director, Madras School of Economics, was speaking on the Rediff Budget Chat
Budget '98
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