As part of an aggressive agenda of continuing economic reform, the government has come out in strong defence of the Kelkar committee's recommendations with President Abdul Kalam referring to them as a roadmap for the creation of a 'stable, transparent and efficient tax regime.'

President Kalam was addressing the joint session of Parliament on the first day of the Budget session on Monday.

The President's speech is a pointer to the fact that the Kelkar committee report may be a part of the Budget even though some of its key recommendations have been rejected by almost all political parties.

The President's speech, which is approved by the Cabinet, traditionally outlines the government's agenda. Monday's speech was considered a political landmark for several reasons. For one, it squarely addressed several politically controversial issues like unsustainable food subsidies, and said they must go.

The President also talked of the need for the state governments to improve their financial management.

“The imperative of fiscal consolidation requires that public finances are managed better. This can take place only through greater collection of revenue and controlling unproductive expenditure,” he said.

Kalam said the value added tax system would come into being from April 1, 2003, and sought to set at rest states' apprehensions that they would lose revenue in the initial period, saying the Centre had assured them compensation.

Macro-economy

He said the Tenth Plan was unique because "it is not merely a resources plan, but a reforms plan. It has deepened the domain of economic reforms by, especially, providing reforms-linked incentives to the state governments."

The President had praise for the way the economy had been managed and said a target of 8 per cent annual average growth was not utopian.

Divestment

He also said India's divestment programme was on course, and the fact that even state governments were selling public sector units indicated that there was 'consensus' on divestment.

He said the proceeds from divestment reduced the burden of public debt, thereby releasing public resources for the social and infrastructure sectors.

Sectoral reforms

The president also said a new civil aviation policy that aimed at attracting investment and modernising airports would be introduced in the Budget session.

He said 18 states had signed memoranda under the accelerated power development and reform programme and the news on the power front 'was good.'

A comprehensive Electricity Bill is before Parliament for approval.

Capital markets

Turning to capital markets, Kalam said the government had recently taken a series of steps to restore investors' faith and institutions' health, including re-structuring UTI, strengthening Sebi, legislating the Securitisation Act and setting up the Serious Fraud Investigation Office.

Social issues

Noting that a nationwide social security number was being launched, Kalam said a comprehensive umbrella legislation for workers in the unorganised sector was being finalised for introduction in the Budget session.

The textile sector was grappling with the challenges of a globalised market and the problems of slow modernisation, Kalam said, adding that several new schemes had been approved to improve facilities in major textile centres besides the nine apparel parks with state of the art machinery.

Run-up to the Budget 2003