Economy and Policy: Deconstructing Budget 99

He's stealing his own thunder. With Budget 98 having failed on all counts to deliver results, Union Finance Minister Yashwant Sinha could have used Budget 99 to redeem himself as a reformer--by serving up a Big Bang package. Instead, he appears to have decided to pre-empt the presentation, and is releasing its pieces in a steady stream. You may not have noticed it, but Budget 99 has been tabled already. Sinha has, for instance, announced a hike in the fertiliser subsidy, extended tax-holidays for export-oriented units, and raised the import duty on gold--besides letting forth a gush of hints about how he will set up regulatory bodies and rationalise the tax structure. More announcements may be on their way before B-Days. Indeed, about the only part of his speech that doesn't seem to be in the public domain are the actual tax-slabs.

BUDGET 99
IN BITS & PIECES

THE EARLY MEASURES...

December 15, 1998: Special fund set up for the North-South and East-West highway corridor and the Golden Quadrilateral

December 21, 1998: Tax holidays for export-oriented units extended to 10 years

December 28, 1998: Fertiliser subsidy increased by Rs 900-Rs 1,400 a tonne

January 4, 1999: Duty on gold imports hiked by Rs 150 per 10 gm

...AND THE PROBABILITIES

Excise duty slabs to be reduced to 3 in number

5 per cent special Customs duty, levied in Budget 96, might be abolished

Further incentives to be extended to exporters

Excise duty on cars likely to be cut from 40 to 25 per cent

Sale of government stake in small banks to larger ones to be amended

An integrated transport policy, covering road, railways, and ports to be formed

An airports regulatory authority might be set up

At one level, of course, this is merely the continuation of the new-found momentum of reforms, which is Prime Minister A.B. Vajpayee's stick to beat his party's anti-reforms lobbies with. Don't forget, the last 4 weeks of 1998 saw, in quick succession, the tabling of new legislation on insurance privatisation, patents, and urban land ceilings. In addition, work on 5 new international airports was commissioned while 3 airports were identified for corporatisation; 28 more public sector undertakings were put on the sale list; a regulator for the oil sector was mooted; a proposal for transferring the Foreign Investment Promotion Board to the Prime Minister's Office was approved; and 100 per cent foreign direct investment in airports, roads, and ports was cleared.

More important, however, Sinha may be operating to a plan. Knowing that there will be opposition to an out-and-out reformist Budget 99, most of all from his own party, he may well be cleverly spreading out the schemes so as to soften the impact on the ideologues. In fact, successive finance ministers have used the Union Budget to make announcements that actually bear no relation to managing the country's finances, simply to make an impact. This time around, it is this very concentration of measures into one 2-hour speech that Sinha may be trying to avoid. The additional advantage, of course, is that the measures can come into effect immediately, and not as late as April 1, 1999. And with the immediate problems addressed--even though the efficacy of the measures will not be known till later--Budget 99 may become a statement of strategies for moving towards longer-term economic goals. If that is what Sinha ends up achieving, it will be much more than what a despondent India Inc.--whose captains are locked in strife over whether import duties should be made to rise or fall--is budgeting for.