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Budget impact won't be inflationary, assures Sinha

BUDGET 2000

The pace of economic reforms will in no case be slowed down and the Budget has set a bold agenda for this purpose, according to Finance Minister Yashwant Sinha.

Reacting to remarks that the pace of reforms may slacken as the Bharatiya Janata Party's coalition partners would view these according to their impact on their electorate, Snha said that he had given enough indication of its movement forward in the Budget itself.

Listing the series of measures in this regard, the finance minister said the government would bring down its stake to less than 50 per cent in banks, without losing its management control, to enable them to achieve capital adequacy norms.

He made it clear that weak banks would only be restructured, not closed down. A legislation had been promised for non-banking financial institutions and the procedures liberalised for foreign direct investment, foreign institutional investment and acquisition of foreign companies by Indian entrepreneurs.

The government had also made it clear that only viable public sector undertakings would be revived and would bring down its shareholdings to 26 per cent in non-strategic public sector undertakings.

The finance minister also ruled out that the Budget would have an inflationary impact as the duty hikes were ''minimal'', representing a fraction of the total collections.

Sinha also would not agree that the Below Poverty Line or BPL people would be affected by the hike in the issue prices of wheat and rice sold through the Public Distribution System or PDS.

Since the government had decided to double the quantity of PDS supplies to BPL families, the subsidy component would in fact go up by Rs 22 billion, the finance minister explained.

Rejecting a suggestion that the tax exemptions to export earnings were being phased out under pressure from the World Trade Organisation, he said the distinction between products meant for local consumption and exports was becoming irrelevant as global competition was witnessed within the country.

''The situation has changed dramatically since these incentives were introduced. The rupee was almost fully convertible and import duties were very reasonable at a maximum of 35 per cent.

''The export segment has become mature enough to be able to stand on its own,'' he said. Further, the exemption was being phased out over five years.

Asked about the fall in investments and savings rate, Sinha said this had arisen from higher fiscal deficit and poor performance of PSUs. However, domestic savings had gone up.

To augment investments and savings, his efforts were geared towards a lower rate of fiscal deficit. He was concentrating on the quality of government spending as well, besides quantity, and on zero-based budgeting. Also, more sectors of foreign direct investment were being placed on the automatic route.

Explaining the thrust on quality expenditure, he said funds would be advanced to states for infrastructure development only through the project-mode. The states would have to come up with specific project proposals to avail of funds to avoid misuse.

Asked whether the Budget had given a go-by to the ''swadeshi vision'', Sinha said swadeshi implied a strong nation and ''we are making all efforts to build a strong India''.

Claiming credit for implementing tax reforms, he said even taking into account the special rates, excise rates had been brought down to four, from eleven.

On customs, the rates were brought down to four from 14.

UNI

'This is not the time for concessions to common man,' says Sinha

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