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Budget - some thoughts
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The whole feel-good effect of the current budget has been neutralised by the reduction in interest rates and increase in the price of diesel and petrol.
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AS ANTICIPATED, the current budget tried to please the common man and the businessman as well. Although the small increase in the price of urea may be justifiable, the Finance Minister has committed faux pas by doing this in a drought situation and while reducing the duty on certain luxury items like cars, refrigerators, etc. (The increase in the price of urea has since been withdrawn). Similarly, there seems to be no justification in spite of the smuggling for reducing the import duty on cut and polished diamonds.
Leaving aside the mumbo-jumbo of fiscal deficit and huge outlay on infrastructure where the figures are manoeuvrable, the concessions to the senior citizens are welcome particularly the procedural simplification pertaining to the TDS and self-assessment. Online submission of returns and payment of refunds (if at all!) through bank-accounts are also welcome.
Interest rate
But the whole feel-good effect has been neutralised by the RBI and the Ministry of Petroleum. Ever since the publication of the Dr. Y.V. Reddy's report on interest rates, the RBI is obsessed with cutting the interest rates in spite of inflation going up. It has cut the Savings Bank interest rate further by 0.5 per cent after the budget. We have not reached the level of Japan with zero interest and service charge to the bank! Our people will never accept this. The details of the LIC's assured 9 per cent return scheme are yet to be worked out. In any case, it cannot be a substitute for the long, simple and straightforward PPF. The same is true of small savings.
Inflation is further induced by the almost fortnightly increase in the price of diesel and petrol whatever be the justification, except perhaps a war on Iraq. People fear that petrol price may touch the Rs. 50 mark shortly. This is coupled with increase in the price of LPG and kerosene. Increase in the price of diesel will only aggravate the already existing large-scale black-marketing in kerosene.
On the administrative front, the rationale for absorbing the Department of Company Affairs in Finance (in spite of the SEBI) is not clear. A better course would have been to bring Commerce under the Finance umbrella (not necessarily merging) because that Ministry cannot function without Economic Affairs and Revenue. In fact, I was pleading for it during my long years in the Commerce Ministry.
If I am right, it is not the convention to mention officials' names in budget speeches because it is FM's speech. For instance, while many of my suggestions in my report on export credit were incorporated and announced straightaway in the budget speech of Manmohan Singh, he did not mention my name. Of course, this is not to minimise the importance of the Kelkar and the Naresh Chandra reports.
Importance of tourism
In spite of the importance of tourism as the second largest foreign exchange earner and very high employment potential, the Economic Survey never used to have a word on tourism. When I pointed out this when I was Secretary, Tourism, they had a sentence the next year.
Since Jaswant Singh is from Rajasthan, he is aware of the importance of this sector and has given the much-needed relief which was long overdue. Along with Rajasthan and recently Kerala, let us hope the other parts of the country will also benefit.
G. SUNDARAM
(The writer is a former Secretary to the Government of India)
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