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K. K. Bangur

ON the face of it, the Budget proposals unveiled by the Finance Minister, Mr Yashwant Sinha, at the first instance, seem pretty disappointing, especially when matched against growing industry expectations.

Considering the recessionary conditions, which have severely impacted manufacturing growth in the last one year or so, I feel no clear direction has been charted out to stimulate demand, and thereby create industrial growth.The revenue- raising effort through additional excise levies, in my opinion, may cause inflationary pressures in the economy and, in turn, put more pressure on the domestic industry, at a time when it is trying to grapple with severe recessionary conditions.

However, earmarking Rs 3,500 crore for the power development and reform programme and the proposal to shift focus from generation to transmission and distribution should be welcomed.

On specific proposals, it may be mentioned that the step-up in public investment on infrastructure, including power and roads, could bring some cheer to capital goods manufacturers. While removal of linking FII investments to sectoral FDI limits may be good news for the markets, the move to tax dividend income in the hands of the recipients at rates applicable to them is certainly not good news for the capital markets.

This will put a dampener on the already depressed markets. I feel that instead of the proposed accelerated depreciation of 15 per cent on new plant and machinery for a new industrial unit or for expanding capacity of existing unit by at least 25 per cent, it would have been better if benefit of incremental depreciation is given to industry.

Some of the good features of the Budget are the proposals on extension of facility of duty-free import of equipment and facilities to both developers of special economic zones (SEZs) as well as the units in these zones, capital gains exemption benefit for bonds issued by National Housing Bank and allowing Indian mutual funds to invest in rated securities in countries with full convertible currency.

(The author is Chairman, Graphite India.)

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