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Sarvadaman Ray

A VISIBLY shaken and nervous Mr Sinha, continuously mopping the sweat off his face as Ahmedabad burnt, delivered a Budget that is more attuned towards structural reforms over the medium term. Overall, it is a bold Budget, delivered by a bold Government and a bold Finance Minister.

The bold steps begin with the announcement that 12,200 Government jobs would be cut by March 2002. Further proactive measure are the dismantling of the APM for oil products from April 1, 2002, reducing the fertiliser subsidy by hiking urea and DAP prices, scrapping the subsidies on kerosene and LPG. These are some of the measures the pundits had hoped for.

But the failure to bring down the interest rate on small savings by at least a 100 basis points, and not announcing measures to perk up demand clearly shows that the Finance Minister was unable to decide whether to take a full step forward, keeping in mind the recent election results, the Ayodhya issue and the turmoil the country is facing.

For the financial sector, corporatisation of IDBI and ports; allowing State electricity boards and municipal bodies to issue tax-free bonds; the creation of a pilot asset reconstruction company; the new Bill on banking, and amending the Banking Regulation Act are certainly steps the markets will like.

Similarly, allowing FIIs to trade in the derivatives segment as well as increasing their minimum investment limit beyond 24 per cent of the paid-up capital of a company are steps that will increase the volume and depth of the capital markets.

However, failure to bring in any measures for activating the primary market for equity as well as reverting to the old norms for dividend tax affected market sentiment adversely, the result being a drop of 145 points on the BSE Sensex at the close of market hours today.

Specific incentives for shipping, tourism, tea, cement and steel, as well as the special policies announced for textiles, sugar and the oil sector will definitely prop up certain scrips once the fine print is properly analysed.

The Finance Minister was also bold enough to initiate further steps in bringing about capital account convertibility and has clearly given corporates the indication to go global. Unfortunately, the salaried employees have again been burdened with additional taxes. To conclude, one may say, it is a Budget with a big deficit, devoid of any brilliance but certainly bold.

(The author is Wholetime Director, Apeejay Finance Ltd, Kolkata.)

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