Money > Budget > Budget News & Analysis FEBRUARY 20, 2002 | 14:20 IST    rediff.com 


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What to expect from Budget 2002-03

Finance Minister Yashwant Sinha can draw comfort from benign inflation, at its lowest in decades, and record foreign exchange reserves as he prepares the Union Budget due on February 28.

A robust farm sector also holds out hopes that increased rural incomes could translate into higher demand for goods and services, helping revive economic activity.

The economic growth estimate for the current year is pegged at 5.4 per cent -- impressive during a global slowdown but far short of the double digits that analysts say is required to wipe out poverty in a country where most of its billion plus people earn less than a dollar a day.

Gross domestic product growth slumped to 4.0 per cent in 2000-01 (April-March) from 6.1 per cent a year earlier.

The central fiscal deficit is budgeted at 4.7 per cent of GDP for the current financial year but most analysts expect the actual figure to be above five per cent on account of poor revenue collections due to an industrial slowdown.

Following are some of the measures expected in the 2002-03 Budget:

GROWTH MEASURES

  • Finance ministry is likely to increase central funding by 35-60 per cent to the infrastructure sector including power, roads, irrigation and railways.

  • Infrastructure Equity Fund likely to be set up with funds from financial institutions, Life Insurance Corporation and State Bank of India.

  • Measures to start pension reforms.

  • Essential drugs may be pruned to around 100 from the present 254 drugs and formulations, all of which are exempt from customs duty.

  • Interest rates on small savings could be revised downwards but political considerations weigh.

  • The government is likely to extend the 10-year tax holiday to the housing sector.

  • Health ministry to propose issue of tax-free bonds of more than Rs 50 billion to fund creation of national health infrastructure.

REVENUE MEASURES

  • The government is unlikely to tinker with corporate tax rates and minimum alternate tax.

  • India is likely to set a fiscal deficit target of 4.54 per cent of GDP for 2002-03 with an estimated increase of Rs 280 billion in revenues.

  • Average custom duties expected to be brought down to 23 per cent.

  • E-commerce transactions likely to be kept out of income tax.

  • Imported liquor likely to become cheaper as the basic duty may be reduced from the current 210 per cent.

  • Additional five per cent duty planned on luxury items including cigarettes, liquor and cosmetics.

  • The government is likely to adopt a three-tier graded customs duty structure and retain the movement towards a single rate structure.

  • To bring all services under the tax net over time and also define an exemption limit based on the turnover of firm.

DEFENCE SECTOR

  • The government is likely to increase defence expenditure by a whopping 25-30 per cent to Rs 780-810 billion from Rs 620 billion.

POWER SECTOR

  • Power sector may be allowed to raise funds through infrastructure bonds on par with domestic financial institutions.

ENTERTAINMENT SECTOR

  • Entertainment industry seeks same status as infotech and communication sectors with exemption from service taxes and lower custom duties on equipment.

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