 |
current
status |
rescue package |
industry expectations |
the FM's mind | budget
blues |
report card | key
ratios
This article on the Union Budget 2001, prepared by the department
of economics and statistics, Tata Services, highlights the choices
before the finance minister and discusses their pros and cons.
The first budget of the 21st century is set against the backdrop
of a slowdown in industrial growth, phasing out of import restrictions,
a gathering global slowdown and a devastating earthquake which
has seriously affected Gujarat, one of India's most industrially
advanced states. These circumstances make the budgetary exercise
a highly daunting task. In all probability, the natural calamity
may force the finance minister (FM) to change the tone of the
budget, giving it a humanitarian rather than a technocratic
approach.
The pre-budget hike in the surcharge
on income and corporate tax is a pointer in this direction.
Even as grief grips the nation, there are dissenting voices
and debates on the government's wisdom in imposing a rather
premature and short-sighted levy, thus burdening industry
further.
In this article, we highlight the choices
before the FM and the measures that he is likely to include
in the forthcoming budget. But before we do that, let us take
a look at the current status of the economy.
The optimism generated by the last
budget in 2000-01 has petered out; the expectation that it
would promote a higher rate of growth was dashed as important
sectors of the economy turned into laggards over the year.
Concurrently, several factors like falling non-food credit,
declining consumption of petro products, lower imports of
capital goods, decelerating business confidence, etc., are
indicators of the overall deceleration in the economy. The
statistical snapshot given below says it all!
| |
1998-99 |
1999-00 |
2000-01 |
| GDP (% growth) |
6.8
|
6.4
|
6.0
|
| IIP (% growth) |
3.8
|
6.5
|
6.0
|
| Manufacturing
(% growth) |
4.1
|
7.1
|
6.0
|
| Agriculture (% growth) |
8.2
|
-1.3
|
1.0
|
| Exports (% growth) |
-5.1
|
13.2
|
20.0
|
| Inflation (% growth) |
5.9
|
3.3
|
6.5
|
| Foodgrains stock (mn. tonnes) |
21.7
|
28.0
|
50.0
|
| Forex reserves ($ bn.) |
29.5
|
35.1
|
38.0
|
| Foreign direct investments ($
bn.) |
2.4
|
2.7
|
1.0 (Apr-Sept)
|
| Foreign Institutional Investments
($bn.) |
- 0.5
|
1.0
|
1.4 (Apr-Jan)
|
| Disinvestment: Realisation (Rs.
crore) |
5,874
|
2,600
|
150
|
| Incremental non-food credit (Rs.
crore.) |
40427
|
72,618
|
34,430 (Apr-Jan)
|
| Indirect tax collection (Rs. crore) |
93,914
|
108,800
|
124,824 (est)
82,355 (Apr-Dec)
|
While there are some positive areas
in the economy such as comfortable levels of food stocks, forex
reserves and buoyant exports, these are outweighed by the other
negative factors, which along with the catastrophic earthquake,
are bound to impact the industrial and fiscal scene adversely.
Over and above, global economic
growth is showing distinct signs of slackening, which is an
additional cause for concern. After witnessing buoyant growth
for the past ten years, the US economy is now in for a bout
of deceleration. This could adversely affect the export performance
of India as well as other Asian economies. However, the impact
is not expected to be even. Although Quantitative Restrictions
will be totally phased out by April 2001, the danger of India
turning into a dumping ground for imports is temporarily at
bay since the government is in a position to employ protectionist
barriers.
Given the plaintive scenario, what are the policy measures
that the FM can take in order to revive the feel-good factor
in the economy?
current status |
rescue package |
industry expectations |
the FM's mind | budget
blues |
report card | key
ratios
|
