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March 1, 2001
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Media heaps praise on Sinha's budget


India's budget may not have won the country a sovereign ratings upgrade, but Finance Minister Yashwant Sinha won media accolades for cutting taxes and putting the faltering economic reform programme back on track.

"Yashwant Winner," declared The Asian Age newspaper, punning on the surname of the minister whose fourth budget it reckoned was the country's best for years.

"FM scores an almost perfect 10," said a business daily.

On Wednesday Sinha unveiled a radical budget for fiscal 2001/02 that promised to cut rates on administered savings, push ahead with privatisation, and revive flagging economic growth.

He cut personal and corporate taxes, increased import duties on key commodities and raised the limit for foreign holdings in Indian companies, all of which drew applause from industrialists who had feared a populist budget.

The stockmarket gave the budget a thumbs-up, with the benchmark 30-share Bombay index rallying 4.36 per cent to 4247.04 on Wednesday. Bonds also rallied and the rupee ended stronger.

International rating agencies were positive about the budget, but caution on the deficit and domestic debt kept ratings steady.

The Indian Express said Sinha had balanced pursuit of the decade-old reform process with middle class aspirations -- politically vital for the 16-month-old coalition government, many of whose members face elections in five states next month.

"The Budget does as much as any Budget can be expected to do to improve the prospects for economic growth by improving sentiment across a broad swathe of the economy. But hope will sour rapidly if action does not follow the promises," it said.


Sinha told parliament the budget deficit would be cut to 4.7 per cent of gross domestic product (GDP) next year, a claim which has a ring of credibility after the government -- for the first time in years -- achieved its latest target, 5.1 per cent.

Administered interest rates on small savings, widely viewed as the main obstacle to a fall in stubbornly high interest rates, were cut by a sweeping 100-150 basis points, prompting cuts in lending rates by banks.

Sinha also pledged to close down unviable public sector firms and press on with sales of state companies, including telecommunications firm Videsh Sanchar Nigam Ltd (VSNL), international airline Air-India and carmaker Maruti Udyog.

The minister's ambitious privatisation strategy came in the face of a political furore over government plans to sell a controlling stake in India's third-largest aluminium producer.

The foreign investment limit in publicly listed Indian firms was raised to 49 per cent from 40 per cent and tax on dividends paid by companies cut to 10 per cent.

The government, acceding to industry demands for labour reforms, also for the first time made layoffs easier for large industry and permitted contract labour.

The Hindu's editorial said Sinha's budget would send positive signals to investors in India and in global capital markets that the process of economic reforms will proceed on requisite lines.

"Mr Sinha's budget has turned out to be a salutary package addressing multiple concerns in a reasonably coherent manner even if some of the budget initiatives are bound to meet with legitimate scepticism if not political hostility."

Budget 2001

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