The Hindu : Sinha firm on rationalising tax structure

Online edition of India's National Newspaper
Tuesday, Mar 05, 2002

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National

Sinha firm on rationalising tax structure

By Our Special Correspondent

NEW DELHI, March 4. The Union Finance Minister, Yashwant Sinha, today signalled his determination to keep a tight rein on expenditure and further rationalise tax structure to get over the country's fiscal woes. Highlighting the importance of mobilising revenues, he defended the withdrawal of tax give-aways in the budget by insisting that the give-aways would disturb the budgetary balance.

Addressing the National Council of the Confederation of Indian Industry (CII), he noted that the fiscal deficit rose to 5.7 per cent during 2000-01 due to shortfall in revenue collections and disinvestment. "If India has to get over fiscal problems we have to look at revenues''.

Expressing his concern over the burgeoning deficit, he said the Fiscal Responsibility Bill had been introduced in Parliament with the aim of reducing the deficit by 0.5 per cent annually. He felt guilty that the fiscal deficit had now been pegged higher at 5.3 per cent for 2002-03.

Mr. Sinha was optimistic, however, about higher growth in the next fiscal owing to reforms in the agricultural sector. He felt that long-term growth in demand would come from the 70 per cent of the population which lived in rural areas. Highlighting the prospect of seven per cent growth in the coming years, he said the global economy was picking up and exports were expected to rise as well which could lead to higher growth in the next fiscal.

He said his intention was to reduce excise duty to 16 per cent CENVAT rate in two years and customs duties to 10 per cent for raw materials and 20 per cent for finished goods by 2004-05. He also indicated that tax rates would come down further in the next fiscal.

Referring to "dream" budgets, he said they only led to fall in revenue growth and pushed up the fiscal deficit. He recalled that the 1997-98 budget presented by Mr. Chidambaram and his own last year were described as such by the industry and promoted the "feel good factor'' but led to a fall in revenue growth. On criticism over the dividend tax and five per cent surcharge, he said he would now focus on fundamentals rather than chase the ephemeral feel good factor. "I will no more be a merchant of the feel good factor.''

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