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| Yashwant Sinha: Braving the brickbats |
This
isn't going to please the punters: Dalal Street isn't exactly an accurate
barometer of Yashwant Sinha's budgetary shindigs. Just as the reaction
to Union Budget 2001-02 was perceptibly over-the-top-the Sensex spurted
177 points on February 28 last year, only to deceive in the days that
followed-the bourses' retort this time round was, to put it mildly,
unexcitable. Yes, Union Budget 2002-2003 had little in it to set the
markets on fire, but did a 143-point drop in the benchmark index do
justice to Sinha's endeavours? The communal violence in Gujarat did
contribute to the solemn mood on the street, but the feedback of industry
captains and market bigwigs at the traditional budgetary jamborees
hosted by the associations distinctly reflected the feeling: that
Sinha hadn't done enough to kickstart growth.
Sinha's biggest sins are that he hasn't brought
down the cost of finance to levels expected by industry (a 0.5 per
cent reduction can't be termed a ''slash''), and that he brought
back a couple of old villains: the dividend tax and surcharges on
corporate and personal income tax. Also, the fm didn't pull out
the stops to reverse the slowdown in manufacturing, and he didn't
provide much-needed sops for sectors in the doldrums, power being
one of the more notable ones.
By no stretch of imagination are we trying
to prefix Budget 2002-03 with epithets like ''Dream'' or any such
synonyms. Indeed, the biggest disappointments has been the reluctance
of the fm to tackle the burgeoning fiscal deficit, despite having
the cushion of high forex reserves, huge foodgrain stocks, and a
transparent privatisation process. But, as is Dalal Street's wont,
it chose to magnify the apparent evils at the expense of the good.
For instance, making shareholders pay a dividend tax will no doubt
dampen investor sentiment, but then the proposal to allow foreign
institutional investors to invest in Indian companies without limits
promises to result in a surge in liquidity.
That's just an aside. Let's look at the bigger,
brighter picture. Where Sinha has bitten the bullet is in the petroleum
sector, by reducing subsidies on lpg and the politically-sensitive
kerosene. Equally brave has been the 5 per cent cut in fertilizer
subsidy. The agriculture sector too has been opened up, with the
high-potential food-processing sector receiving a major fillip,
as raw materials can now be procured directly and not via the state
trading corporations. Futures trading in all agricultural items
is another step forward. Then, there's the excise and customs duty
rationalisation, and the first tentative steps towards capital account
convertibility.
The fm has also paved the way for Indian companies-particularly
those in the it sector-to aim for global competitiveness by making
overseas acquisitions and joint ventures simpler. Corporates can
now invest up to $100 million overseas without approvals (up from
$50 million) and investments in joint ventures abroad can be automatically
made up to 50 per cent of a company's net worth. Lowering of customs
duties on computer hardware will also help increase the penetration
of PCs and other it products in the country.
Union Budget 2002-2003 may not have enough
to revive Indian industry, but then if Sinha could pull that off
he wouldn't have to be in government-he'd make a very successful
magician too.
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