Politicians, industry disappointed with Budget

Basharat Peer/Tara Shankar Sahay in New Delhi and Fakir Chand in Bangalore

Opposition parties on Thursday termed the Budget as anti-agriculture and anti-poor, contending that it would take the country towards the " yoke of foreign economic control."

Reacting to Finance Minister Yashwant Sinha's Budget, Communist Party (Marxist) Leader in the Lok Sabha Somnath Chatterjee pointed out that after the burden of the Railway Budget, "Budget is the declaration of the government's war on farmers, the small-scale sector and the public sector undertakings."

He said, " the financial situation is already totally disturbed and the Budget reveals that. The central government is imposing its ideas on the state governments."

Chatterjee said that the state of industrial production was pathetic and, " the government has given no explanation for the economic slowdown."

" We are in a deeper economic mess than ever before and this government's economic policies will take the country towards total foreign control of our economy," he pointed out.

Trinamul Congress leader Sudip Bandopadhyaya said, "It is a reasonable Budget to the maximum possible extent."

He, however, pointed out that since Sinha had termed the Budget as 'kisan azadi Budget', the government should reconsider the hike in the price of kerosene, and fertliser so that it was not " self-contradictory."

Former Lok Sabha speaker and Nationalist Congress Party leader Purno A Sangma described the Budget as bringing " a welcome emphasis on agriculture."

He, however, pointed out, "I am disappointed that no special package has been announced for the northeast " which is a must."

But the increase in the price of liquid petroleum gas should have been avoided, he said.

Former Andhra Pradesh chief minister and senior Congress leader N Janardhan Reddy said, " Sinha's Budget is anti-farmer, anti-poor and anti-labour."

Besides, the hike in the LPG price would be injurious to the people and the government's inability to control the fiscal deficit would greatly increase poverty, he said.

Congress leader and former Lok Sabha speaker Shivraj Patil pointed out that " it is a beaten-track Budget."

He said there was nothing in the Budget to indicate how the government would achieve the targets.

The Congress chief whip in the Lok Sabha, Priya Ranjan Dasmunshi said, " this Budget has totally ignored the problem of unemployment and also the textile sector.'

He said his party was scanning the entire Budget and apprehended that " the fiscal deficit is poised to spin out of control."

The Rashtriya Janata Dal chief and former Bihar CM Laloo Prasad Yadav said, this year's Budget is pro rich and it will only help the well off section of the country, and not the poor.

Yadav said the Budget was prepared under pressure from the International Monetary Fund, World Bank and World Trade Organisation.

"There is no special incentives for the backward states like Bihar, which are facing resources crunch," Yadav said.

Andhra Pradesh Chief Minister N Chandrababu Naidu, whose Telegu Desam Party is a key ally of the National Democratic Alliance government came out strongly against the hike in LPG and kerosene prices and cut in fertiliser subsidy, saying they would amount to burdening the common man.

"We are totally opposing these proposals in the central Budget. It is not proper to further burden the poor and farmers when they are already facing problems," Naidu said.

The Telugu Desam Parliamentary Party would meet and chalk out a strategy on how to mount pressure on the Centre to reconsider these decisions, he said.

Mixed Reaction from India Inc

If it was bouquets all the way for the 'dream Budget' Union Finance Minister Yashwant Sinha presented around this time last year, the lack-lustre Union Budget for the ensuing fiscal year (2002-03) on Thursday has evoked mixed reactions from the captains of the industry across the board.

Rahul Bajaj, the chairman and managing director of Bajaj Auto termed it positive at a macro level.

"Overall the Budget is positive with a focus on infrastructure. It is also growth oriented," Bajaj said.

The five per cent surcharge levied on all individuals whose annual income exceeded Rs 60,000 drew flak from all quarters.

"The sentiment changed in the stock market immediately after the finance minister announced this tax surcharge, " Bajaj said.

Venu Srinivasan, managing director of the TVS scooters, was completely disappointed with the Budget. "The Budget is a disappointment for the auto sector. There has not been any move towards a single excise rate," he said.

However, being a two wheeler manufacturer, he appreciated the decrease in petroleum prices,

Satish Reddy, the COO of the pharmaceutical giant Dr Reddy's Laboratories described the Budget as "an absolute dampener" as far as the research and development sector was concerned.

"No incentives have been announced and no exemptions from taxes have been given to the R&D sector, which discourages other companies from joining the sector," Reddy said.

There has been talks of considerable aid for the pharmaceutical sector but there was no mention of that in the finance minister's speech, he added.

"The focus on infrastructure is positive and technology absorption increases with infrastructure development", said Manoj Chugh, the president of the CISCO systems.

However, Chugh lamented the absence of measures to bring down the cost of the Internet services in India.

"There are products related to the Internet technology which are manufactured outside India and there is need to lower the taxes levied on them, if we have to reduce the costs of the services," he said.

Gautam Thapar, the vice-president of the Ballarpur Paper Industries called it an "indifferent Budget" from the manufacturers point of view.

"It was business as usual. The finance minister has done what he could. It was balanced in continuation with the trend established over the last few years," he said.

Commenting on what the Budget had for the paper sector, Thapar said, "There is nothing for the paper sector in the Budget. I was not even expecting much."

However, there were some kind words too.

"It is a deliverable and an achievable Budget. It recognises the ground level difficulties as we face them. The focus on infrastructure, for instance roads and tourism is very positive," Sanjeev Goenka, the Confederation of Indian Industry, president, said.

Thumbs down for Sinha in India's Silicon Valley

Although there were no great expectations from the beleaguered finance minister on a repeat performance of what he did last time, Sinha's Budget disappointed the industry, especially the IT as well as the manufacturing sectors in India's Silicon Valley, Bangalore.

"There is nothing in the Budget proposals that could stimulate higher growth rate in the economy. There is no sign of prime pumping to step up investments in the infrastructure sector. Lacking in focus, the Budget only attempts to tinker with the existing anomalies," lamented ABB India managing director Ravi Uppal at a Budget conference, organised by the Bangalore chapter of the Confederation of Indian Industry.

In the absence of major thrust to turn around the current sluggish growth rate, the impact of the Budget will be minimal on the state of economy. Measures to reduce fertiliser subsidy by 5 per cent, marginal cut in diesel and petrol prices, and just 5 per cent decline in peak import duty to 30 per cent from 35 per cent are only half-hearted as they are not sufficient to revive the economy, many CEOs and CMDs felt.

In the run up to total decontrol of administrative price mechanism in the oil sector from April 1, the substantial reduction in subsidies for LPG and kerosene, has been, however, hailed as a step in the right direction for it signals the government's commitment to move towards the free-market economy.

"On the flip side, the setting up of the Rs 10-billion Infrastructure Equity Fund, plan allocations for tourism, full convertibility for NRI deposits, and lifting of curbs on sectoral investment limits by foreign institutional investors will benefit the economy in the long run," Uppal stated.

In the case of the IT industry, more than the software sector, it was the hardware sector that felt disappointed as there was no specific mention about the measures being taken by the government to boost its prospects.

Tyco Electronics managing director Samir Inamdar told rediff.com that unlike last year, there was no reference to government's commitment on IT spending for ushering in e-governance. Demand-oriented growth has not been addressed.

"While Sinha touched upon infrastructure, textiles, steel, and cement sectors, he was totally silent on the IT industry as well as on labour reforms. The Budget lacks focus in so far as structural reforms are concerned." Inamdar lamented.

The electronics industry was thankful to the finance minister for extending the lowering of the import duty structure on raw materials and components to 10 and 20 per cent respectively to 2004-05 as such a breather will give enough time for the domestic companies to gear up for competition and brave the onslaught of imports.

Andiana Systems CEO Vikram Shah, however, said the move to set up Urban Reform Incentive Fund will boost the prospects of the software sector as quality of life and living standards in towns and cities would grow substantially with the additional infusion of funds in improving the basic or civic amenities.

"The move to double investment ceiling for acquisition abroad is a step in the right direction as it will enable a number of software companies like Infosys and Wipro to make strategic investments and acquisitions abroad," Shah pointed out.

The automobile sector was also sore with Sinha, as he had failed to remove the special excise duty of 16 per cent on motorcars, multi-utility vehicles, etc.

"Even the much expected reduction in excise duty from the current 32 per cent is quite disappointing," said Sudhakar Pai, president of Manipal Group and Karnataka chapter of CII.

Economist hails Sinha on taxation measures

Eminent economist P R Brahmananda commended the finance minister for not succumbing to the powerful lobbies of the private corporate sector and the upper middle classes, which sought more exemptions, reliefs, and reductions on the taxation front.

"Sinha has broadly kept the tax rates intact except in respect of provision of more on depreciation, allowances, and removal of the dividend tax on mutual funds.

In the case of administered interest rates on small savings, though the finance minister was under pressure to reduce them by 1-1.5 percentage points, he not only limited the cut by 0.5 points, but also linked these rates to yields on government securities," Prof Brahmananda stated.

The borrowing target for the ensuing fiscal year (2002-03) is up only by 5 per cent. This means that yields on government securities may have a chance of moving up with competition in the financial markets from the corporate and other sectors.

"Probably, the cheap money era which has not lead to more investment in India has come to an end. If yield rates move up, the savers will automatically get the benefit of higher rates."

Meanwhile, Greater Mysore Chamber of Commerce and Industry president Harbans Thukral remarked that the finance minister tried to do a balancing act by attempting to reach out to all sections of tax payers and sectors of the economy.

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