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March 15, 2000
Tax proposals won't be rolled back: Sinha
"Do not ask for rollbacks and undo the Budget," he said, adding that unlike the 1990-91 crisis, the present tight position of the government is not reflected clearly on account of low inflation, high foreign exchange reserves and a revival in the economy.
The crisis is in balancing the government revenues and expenditure which is a matter of deep concern, he said.
Addressing a post-Budget meet organised by the Associated Chambers of Commerce and Industry or ASSOCHAM in New Delhi, Sinha chided the industry leaders for demanding rollbacks of export earning tax and dividend tax, while preaching political parties to accept food and fertiliser subsidies cut.
"Political consensus on economic reforms is on the retreat. Unless we sit down and recreate the consensus, it will be difficult to achieve our aims," he said.
Sinha dismissed fears that the tax on export earnings would curb its growth, stating that the impact on exports will be only 0.75 per cent a year. "This can be adjusted by a single-day rupee currency fluctuation."
On the fiscal deficit remaining above five per cent for the third year in a row, he said, the 2000-01 year faced "exceptional expenditure'' on account of Kargil conflict, interim relief of 11th Finance Commission and increased Plan expenditure. Put together, the three factors resulted in an extra burden of Rs 350 billion on the budget.
On the other hand, the government could not have cut social expenditure without inviting criticism for whittling down from its social responsibilities. Planned expenditure on basic infrastructure, rural development and agriculture could have been slashed only at the cost of harming economic revival, he added.
Sinha said, the government has ''complete control'' over the non-plan revenue expenditure, which grew by only 1.8 per cent last fiscal. "We will continue to attack non-plan revenue expenditure and achieve success in its control.''
On why the Budget has not opted for big ticket privatisation and drastic downsizing of government, Sinha said, ''It is not wise to expose all cards and invite building up of opposition.''
He ruled out retrenchment of people from the government at a stroke as the current legal provisions do not provide such a step. Hence, the intake is being controlled.
Expenditure control requires a sustained application of mind, which the government is unable to do, and has appointed expenditure committee, he said.
Responding to criticism that the 2000-01 budget was not bold enough, he said the government is hard put to defend the 'soft' budget especially in the face of determined opposition in parliament and outside.
Sinha asked the industry leaders to change the mindset of 'I am special and I should be treated specially', and desist from seeking exemptions and sops.
Sinha, said the tax base could not have been widened further as agriculture which contributes 30 per cent of the gross domestic product or GDP lies outside the central tax net. "If large parts of the economy are beyond the tax net, even if the finance minister stands on his head, he cannot increase the tax base.''
Even though stocks markets have fallen since the Budget, it cannot be taken as an indicator on the fundamentals of the economy. "Stock markets are not the be all and end all for reflecting the state of the economy,'' he added.
Sinha said, the Budget has been misconceived because the fiscal deficit is seen to be unsustainable, tough decisions were supposedly not taken and the reaction of stock markets. ''As time passes by, you will realise the importance of the budget proposals.''
He said the Centre would try to sensitise all public agencies right from local governing bodies to state governments on controlling the national fiscal deficit.
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