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News & Views: India Budget 2004

India Budget 2004 Summary and Comments

1.Taxes and Excise Duties.
(i) Taxable income of up to Rs 1 lakh to be exempt from tax systems, although the tax returns will still be filed.
(ii) There is no change in tax slabs.
(iii) Full exemption from excise duty on computers
(iv) No excise duty on handlooms and powerlooms
(v) Withdrawn of CENVAT on textile. Industry to have new tax regime.
(vi) No excise duty on dairy machinery, tractors and hand tools,
(vii) Top rate for customs duties to be retained at 20%
(viii) Excise duty on steel raised to 12% from 8%
(ix) Debt oriented mutual funds to be taxed.
(x) Senior citizens to get 9% interest rate on small saving schemes,
(xi) Customs duties to be reduced in a structurer manner, taxes to be aligned with ASEAN countries,
(xii) Customs duties on various health-related items reduced or removed,
(xiii) Gifts from unrelated persons above Rs25000 to be taxed,
(xiv) Tonnage tax for shipping company
(xv) No taxes on profits in all new agro-processing industries,
(xvi) No income tax on family pension of widows of defence personnel,
(xvii) Service tax not to be expanded.

Comments: A bad budget for manufacturers with the exception of comlputers. Good for dairy producers and food-processing companies. Agriculture benefits at the cost of steel manufacturers and related industries.

2. Budgetry Estimats & Allocations

(i) Total expenditure estimated at Rs. 4,77,829 crore,
(ii) Planned expenditure estimated at Rs. 1,45,590 crore, non-planned expenditure at Rs. 3,32,239 crore,
(iii) Government to raise defence allocation from Rs. 65,300 crore to Rs. 77,000 crore,
(iv) Fiscal deficit estimated as 4.4% of estimated GDP, revenue deficit at 2.5%,
(v) Cess of 2% for education and midday meal programme,
(vi) Government to set up Backward States Grand Fund with a corpus of Rs25,ooo crore to be provided over 5 years,
(vii) Loans to states to carry reduced interest rate of 9%,
(viii) Special economic package for Bihar, Jammu & Kashmir North Eastern states,
(ix) Bihar to get a package of Rs. 3,225 crore,
(x) Report on subsidies to be tabled in parliament,
(xi) No change in existing interest rates on small savings,
(xii) Interest rates to be aligned to the market.

COMMENTS: Lot of misery and scope for corruption and nepotism herre. Regulation regarding proper use of funds for Bihar and other states must come into force; otherwise Bihar will remain backward even after a hand-out of over 3000 crore.

3. Industry and Investment
(i) Subsidy assistance for SSIS to be raised from 12% to 15%
(ii) 85 items to be taken out of small scale industries' reserved list,
(iii) More credit to be made available to small scale and cottage industries
(iv) Government to divest stake in state firms to fund social schemes,
(v) New bill on regulation of special economic zones,
(vi) Foreign Direct Investment limit in Telecom - from49% to 74%
(vii) " " " " in Insurance - from 26% to 49%
(viii) " " " " in Civil Aviation - from 40% to 49%
(ix) Government to establish investment commission to attract foreign capital,
(x) Port infrastructure to be developed,
(xi) Upgrading of 500 it is across the country,
(xii) Government to enhance investment in industry to create more jobs.

Comment: This step-motherly treatment to foreign investment is a sign of backward thinking. Even the rise in Telecom, Insurance and Civil Aviation, meagre as it is, has brought opposition from left communist parties. These outdated parties must not be allowed to dictate their terms to the Prime Minister.

4. Agriculture & Rural Development
(i) Food subsidy of Rs 25,800 crore
(ii) Government committed to give insurance to farmers,
(iii) Rs 40,000 crore to be made available to banks for lending to infra-structural lprojects,
(iv) Agricultural cooperatives to be encouraged,
(v) Better price support and suverior seeds for oilseed farmers,
(vi) Government to launch national horticulture Comission on the lines of Anand model,
(vii) Doubling of agriculture credit in 3 years,
(viii) Rs 30,000 crore to be spent per year on water-related projects,
(ix) Rs. 2,610 crore to be provided for rural drinking water,
(x) New project to repair, renovate and restore all water bodies under special package for rural irrigation.

Comments: A good start to help rural economy; but proper regulation is needed to se that the subsidy goes to the right place. Water-related projects are essential and overdue. There should be more priority to these projects.

5. General Policy Directives:
(i) Finance Minister calls for 7-8% growth in Gross Domestic Product (GDP)
(ii) Government to follow a four-year road map to achieve common minimum programme
(iii) Government to provide more housing for people below poverty line,
(iv) Government to ensure that children remain in school for at least 8 years,
(v) Government to guarantee 100 days of work per year to at least one person for every family.
(vi) Finance minister calls for focus on rural infrastructure,
(vii) Planning Commission to reorient approach to planned development,
(viii) Government aims to eliminate revenue deficit by 2008-09
(ix) Focus on agriculture and fiscal consolidation.

Comments: There is a lot of wishful thinking here. These directive, good as they are in concept, need proper organisationaal set-up to come to fulfilment. The present government is hoping to survive till 2008-09. May God Save India!

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