The finance minister needs to be commended for using the budgetary process to impart strong support for key national priorities, namely infrastructure, health, education, agriculture & industry, fiscal consolidation and poverty alleviation.
His emphasis on public-private partnership to improve social service delivery based on demonstrated milestones is indeed pathbreaking.
Extension of tax benefits to restructuring activities in the service sector, namely banking and tourism, will significantly improve resource allocation and consequently enhance capital productivity.
This measure is complemented by the withdrawal of expenditure tax on hotels. As observed by the finance minister, states should match the Centre's initiatives by abolishing luxury tax towards realising the economic potential of tourism.
The fillip provided to biotechnology and pharma demonstrate recognition of technology as a key driver of change. The user-friendly administrative reforms will not only improve tax compliance, but will eventually lead to expansion of the tax base.
The determination to introduce VAT effective April 1, 2003, underscores the government's long-term orientation to unify the Indian common market and modernise the country's tax system.
However, the VAT system will need to be supported by proactive initiatives from states to eliminate multiplicity of local taxes. Measures to rationalise excise duties re-emphasise the strategy to enlarge the tax base through moderation in taxes.
While the cash-management system intends to regulate expenditure levels of high-spending ministries, systematic reduction of non-value adding government revenue expenditure would be absolutely essential to rein in fiscal deficit.
I am particularly pleased with the thrust on agricultural reforms as outlined in both the Budget speech and the Economic Survey. Agricultural reforms are critical to the achievement of the 8 per cent economic growth target.
The strategic emphasis on productivity, diversification of land use, technology absorption, value addition and resonance with markets augurs well for ushering in the second agricultural revolution. As in the case of state taxes, these measures would need to be supplemented by reforms at the state level.
The author is chairman, ITC Ltd.
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