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March 8, 2000
Sinha open to 'review genuine shortcomings, problems and irritants' in Budget
Finance Minister Yashwant Sinha today rejected the industry's demand to roll back dividend tax, but stated that genuine concerns regarding the proposals in the Union Budget 2000-01 would be addressed.
The government would also work towards enforcing stricter expenditure control measures, Sinha said at a meeting organised by the Confederation of Iindian Industry in New Delhi.
Allaying the industry's concerns over the country's fiscal situation, Sinha said, ''Budget presentation is not the end of everything on the policy front. If there are some genuine concerns, we can have a relook. We are partners in progress and if the industry feels there are some real serious shortcomings, problems and irritants in the Budget, we are prepared to review them.''
However, the dividend tax would not be rolled back. But the government is willing to consider an alternate Employee Stock Option Plan or ESOP tax scheme, he added.
''As far as the dividend tax is concerned, we feel it was necessary to impose this levy... Please live with it as it cannot be rolled back.''
The ESOP tax, Sinha said, is aimed at retaining the skilled labour force, who are likely to migrate, in India as also attract people to work here. ''We felt ESOPs needed to be taxed and have come with a proposal. But if you can suggest a better alternative, we will be happy to review this.''
However, the minister refused to comment on the alliance partners' demand to roll back the 15 per cent increase in urea prices and subsidy cut on food.
Sinha stated that despite the fiscal deficit having soared to 5.6 per cent of the GDP as against the targeted four per cent, there was no reason to be over-concerned about India's fiscal situation. The government, he said, is now aiming to confine it to 5.1 per cent in the 2000-01 fiscal.
Increased outlay on defence due to the 50-day Kargil conflict and advances to state government for the 11th Finance Commission were cited the main reasons for the 5.1 per cent fiscal deficit target for the year. ''These two provisions together add up to Rs 240 billion, that is 1.2 per cent of the GDP. If these provisions were not to be made, I could have contained the fiscal deficit at four per cent,'' he added.
The industry's apprehensions of excise, he said, have largely been addressed. ''It is a movement forward. In the past two years, excise rates have been reduced from 11 rates to four.''
Addressing the industry's concerns that the government has failed to address the issue of expenditure control and downsizing of the government, the minister said efforts are on in this front. ''It is not realistic to expect the government to cut expenditure and downsize government overnight. We are working on these issues and we will continue to deal with expenditure with a scalpel. We will do our very best but I cannot specify as to when I will bite the bullet.''
Absence of a national consensus on divestment, Sinha said, was hampering the process of selling off government shares in public sector units. In view of these problems, the government had taken a conscious decision not to announce big-ticket divestment in the year.
''We could have announced big-ticket divestment, but decided to announce a modest target and work towards exceeding it.''
He attributed the uncertainty at the Centre to the six months lost in electioneering process last year. That is why the government missed its divestment target this fiscal. ''Had we not lost six months, things would have been better. It is not going to be easy on divestment this year as well. We have to tread cautiously and achieve the set targets.''
He further reiterated that the government will not close down any banks but would recapitalise the ailing ones. ''We cannot talk of privatisation of banks now and there was no way to prepare the country for closing down banks. So we decided to recapitalise the banks. I shall get this done through a parliamentary legislation and ensure that the public sector character of these banks does not change.''
Authorities would be appointed for each of the ailing banks and efforts would be made to nurse them back to health.
Addressing a query on allowing free import of technology, the minister said, talks have been initiated with the ministries concerned in this regard and the issue was under active consideration.
Sinha said he would not put any pressure on the Reserve Bank of India to lower interest rates.
Stating that it was up to the RBI to determine the timing for lowering interest rates, Sinha said, ''I have no wish to interfere in the domain of the RBI. I have done my best in the budget and now the RBI governor and the board of RBI should determine lowering of rates and its timing... They have to now determine the direction the monetary policy should move in.''
Citing the steps taken by his government for creating an environment for softening interest rates, the minister said, ''I had brought down the interest rates on small savings and PPF by one per cent in January, and reduced general provident fund rate by one per cent in the Budget. I have also abolished the interest tax. The only thing I have not accomplished is lowering of fiscal deficit... I have done my best and now it is up to the RBI governor.''
The Union Budget, he added, has created a right atmosphere for the RBI to effect any changes in the interest rate regime.
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