Financial Daily from THE HINDU group of publications
Friday, Jul 09, 2004
Industry & Economy
A progressive budget
ONE of the topmost priorities of any government today is to find ways and means to put more money into the hands of the rural middle class and poor sections of society. That's because the next surge of demand for manufactured goods and services will come from the rural consumers. The Finance Minister P. Chidambaram made a good beginning by announcing a major policy package for enhancing rural credit, just three weeks before the Budget. Under this package, the objectives were to increase rural credit by 30 per cent increase coverage under the Kissan credit card schemeand restructure the existing debts of the farmers.
Now, the Budget has carried this philosophy forward. His moves to reduce excise duty on a number of products purchased by the rural sector (especially farmers) like tractors will increase the amount of disposable incomes in the rural areas. This again may help increase demand for several products.
In addition, the Finance Minister has provided a comprehensive vision to initiate "reforms with a human face" and help improve the lives of the millions of poor people in the country.
If the blueprint is implemented in earnest, rural demand should get a sustainable boost over the next few years.
This should further aid the process of putting more money in the hands of rural consumers, which will give a further boost to the manufacturing sector.
In the end, it will also help fulfil the current government's target of a sustainable GDP growth of 8 per cent every year for the next few years.
I welcome the cess of 2 per cent on all central taxes (excise, customs and corporate) as it will help more and more children to get education and proper meals which in turn will help in the overall growth of the nation. Electrolux will not increase the prices of its products.
In addition, the sops given to boost sentiments of the capital markets and ease the norms for foreign institutional investors (FIIs) will enable corporates to raise more money through public issues.
That will help increase private investments, giving a further fillip to the manufacturing and services sectors. This will increase existing capacities and aid supply-led demand.
However, steel prices are likely to go up because of an increase in excise duty (from 8 per cent to 12 per cent) and the levy of counter-vailing duty (equivalent to the excise duty) on imports.
It will impact the production cost but we will not pass the cost burden to the customer.
VAT is a progressive step made by the FM. Overall, I would say it's a progressive budget.
(The author is Managing Director & CEO, Electrolux Kelvinator Ltd.)
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