Sinha may flag off second round of reforms

By Our Special Correspondent

NEW DELHI, FEB. 28. The Finance Minister, Mr. Yashwant Sinha's third successive budget presentation tomorrow is expected to carry some major policy announcements, signalling the launch of the second generation of economic reforms.

A big push to the information technology industry by encouraging venture capital finance, a liberal legal framework for e-commerce and removal of existing bottlenecks hindering the growth of this sector are expected to be part of the Budget announcement.

Another significant initiative could be in terms of restructuring the public sector by infusing largescale privatisation. The process has been attempted in the past, but the creation of a separate Department of Disinvestment to oversee the actual exercise might goad the Finance Minister to announce what is now called ``big ticket privatisation'', that is, going the whole hog in disinvestment instead of doing it in a dribble. Such an exercise is expected to generate substantial resources, something which has eluded Finance Ministers in the past.

Mr. Sinha is also expected to make bold and announce some expenditure cuts by reducing subsidies on food and fertilizers. While doing this, he is likely to couch his proposal in such a way that the savings to the exchequer would be available indirectly and not through a cut in overall allocation. In other words, the scheme of subsidising fertilizers could be so modified that the Government would be saving revenue while not reducing the quantum of subsidy received by fertilizer companies. Similar tinkering with other hidden subsidies could also form part of the budget.

On the direct tax front, there is anticipation that Mr. Sinha will continue with the 10 per cent surcharge that he imposed last year, despite his promise to remove it this year. In addition, he is likely to clean up the income tax and corporate tax laws by removing a host of concessions and exemptions that currently crowd the direct tax laws. As for the indirect taxes, more than one indication has come from the Finance Ministry that the movement towards a single excise rate would begin. This is expected to simplify the taxation procedure and reduce litigation. Selective concession to any particular industry is practically ruled out since the Finance Minister had restructured the excise law last year just to obviate pressures on the Government from individual industries.

There is substantial speculation that some export earnings could be brought under the tax net, including software exports. So far, exporters have enjoyed substantial income tax benefits on their earnings and some of this might come under tax. This move is not only aimed at mobilising revenue, but experts say that with incomes being exempt, the Government does not have a proper idea about the actual earnings of the exporting community.

On the whole, there is largescale expectation that Mr. Sinha will present a ``positive'' budget, which will further encourage the economic recovery witnessed during the current fiscal year and not present an ``accountant's budget'', involving too many accounting changes.

PTI reports:

The budget is likely to step up plan allocations by 19 per cent at Rs. 87,000 crores while enlisting measures to cut fertiliser subsidy by 15-20 per cent and increase social sector funding by Rs. 1,000 crores.

Mr. Sinha is likely to increase the revenue receipt target to over Rs. 2,00,000 crores from about Rs. 1,80,000 crores in the current financial year, Government sources indicated.

While fixing the gross budgetary support of Rs. 87,000 crores for the fourth year of the Ninth Plan, up from Rs. 73,000 crores in 1999-2000, the Government is also likely to cut the budgetary support to Central Ministries by one percentage point, which would be transferred to the States' account.

Among the major beneficiaries would be the newly- created Ministry of Information Technology, where the allocations for the sector are expected to increase by 74 per cent from over Rs. 300 crores earmarked for the Department of Electronics for the year 1999-2000.

Indicating that budgetary allocation for social sectors would be increased by about Rs. 1,000 crores, sources said Mr. Sinha was also likely to announce a new basic minimum services programme that would incorporate all the existing schemes for social and rural development.

- PTI

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