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Friday, Mar 01, 2002

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A good Budget, but will it click?

P. V. Indiresan

ONCE bitten twice shy! Last year's Budget was hailed as a dream. This year, it has got a thumbs' down signal, at least from the stock marketOn the whole, this is a good Budget with many good moves.

By world standards, India is an under-taxed country. The 5 per cent surcharge about which there have been complaints amounts to barely 0.18 per cent of GDP. That is insignificant compared to the costs of coping with the inefficiencies in administration, and the inadequacies in infrastructure. The Budget has done well to stimulate both physical and social infrastructure. I have been associated with one scheme for improving engineering colleges. Increased provisions for such schemes will help many institutions other than IITs to produce good engineers. That will not show directly on the bottom line of any company, but indirectly, that is going to be a boon.

Our urban services are in a mess; money allocated to improve them is worthwhile. Likewise, investment in housing is probably the best remedy for the demand recession that we are going through. However, it is a pity that the Budget has nothing to say about improving urban transportation.

Our banks have been in deep trouble, particularly Tamil Nadu's own Indian Bank. The Indian Bank has passed through horrific times due to bad management, but, of late, has made heroic efforts to redeem itself. It is happy news that the bank has been given a capital grant of Rs 1,300 crore. That is not the full amount the bank needed, but it will go a long way to put it back into shape. The Budget has made a provision for setting up an Asset Recovery Company, which was long over due. For various reasons, banks have not been able to dispose of the properties pledged to them as collateral. So, helping the banks to recover their loans is a good move.

Everybody is excited about agriculture. Considering the grain mountain we have built up, the sad state of our plantations, the non-acceptance of our wheat even by Iraq, and the sub-standard quality of our milk, it is doubtful whether agriculture can contribute much more to our economic growth. However, TIFAC has made useful advances in bringing our milk production to international standards. Increased allocation for agricultural research may produce other benefits. Unfortunately, our industrialists do not, as yet, value investment in R&D.

From past experience, I have come to the conclusion that the Finance Minister is like a bowler — he can succeed only when fielders help.

As the economy shifts more and more into private hands, it will now be the responsibility of the private sector to make good use of the openings he creates. Will they? Considering the way the stock exchange has made much of the 5 per cent surcharge, too small a reduction in interest rate and the dividend tax and ignored the other moves, that is doubtful.

(The author is former Director, IIT Madras.)

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