Purse-strings opened for Central Govt staff

One clear casualty of this was banking reforms. With the world moving to market-determined interest rates, the Government has decided to continue telling banks what rates to charge different sections of the society.

Poll-positive announcements included:

• Increasing the ambit of PM’s Antyodaya Anna Yojana to 2 crore BPL families from the present 1.5 crore

• Promise to issue Kisan Credit cards to all eligible farmers before March 31

• Extending Farm Income Insurance Scheme pilot prject from 20 to 100 districts (which could include constituencies of top NDA leaders)

• Additional benefits to government employees like extra DA and allowances when posted in areas like Andamans and Lakshdweep.

Middle classes expecting a hike in standard deduction for income tax are in for disappointment—Singh left this untouched with a promise to ‘‘revisit’’ it later.

But there is good news for those holidaying abroad, you can now bring in tax-free baggage upto Rs 25,000 per person, up from Rs 12,000. It’s the second time in three weeks that this allowance has gone up from its original level of Rs 6,000. Also Customs duty on the remaining baggage will be down to 40 per cent from the present 50 per cent.

To continue to encourage investments in listed shares in the stock market, Singh announced that last year’s scheme of exemption from capital gains tax on these investments would continue for another three years till March, 2007.

The big-ticket announcement by Singh was the Centre’s decision to cut stamp duty rates by 50 per cent which would mean cheaper business transactions, including mergers and acquisitions. This may kick-start investment and economic activity and even real estate deals especially in Union Territories to start with.

It could also put indirect pressure on states to cut stamp duties as a pre-poll measure even though that’s easier said than done—given the bankruptcy of most states.

After announcing in the last Budget privatisation of two airports and building of two convention centres at Delhi and Mumbai, dreams which have yet to be realised, Singh announced such convention centres and international airports for his home state — Rajsathan (at Jaipur) and Goa — this year.

Other measures which were more poll-oriented than anything else included a scheme to revitalise the cooperative credit structure, envisaging an outlay of Rs 15,000 crore to be shared by the central and state governments; special tea term loans repayable in five years with a moratoriam of one year to tea growers in the North East. And a package for ailing sugar mills, an important vote bank in UP and Maharashtra which would get as a temporary measure of relief, restructuring of loans.

The FM also promised making operational an Infrastructure Fund announced last year which would lend money at rates 2 per cent less than the Prime Lending Rates (PLR). He announced similar funds for Agriculture Infrastrcuture and Small and Medium Enterprises.

Then there were measures for the infrastructure sector even if these were statements of intent to bear fruit if the NDA came back to power. On direct taxes, he said fiscal benefits available to new projects in the power sector should be extended to 2012 instead of the earlier announced 2006.

More significantly, Singh announced that foreign companies with BPO units in India would not be taxed, reversing an earlier order of the Finance Ministry.

Apart from raising the allocation to Defence by 10 per cent to Rs 66,000 crore, Singh announced setting up of a non-lapsable Defence Modernisation Fund of Rs. 25,000 crore for weapons systems acquisition.

And, inevitably, to perpetuate the ‘‘feel good’’ factor, Jaswant Singh said that the economy was poised to grow by 7.5 to 8 per cent during the current year.

To please the other constituent of any Finance Minister’s audience — India Inc and economists — there was a promise of commitment to economic reforms, with fiscal deficit down to the less that 5 per cent of GDP mark for the first time in several years. Fiscal deficit for 2003-04 has been pegged at 4.8 per cent significantly down from last year’s level of 5.6 per cent. The Finance Minister has promised to reduce this further to 4.4 per cent by next year.

Call it jugglery or a last-minute rush of good luck. Disinvestment targets are close to being achieved thanks to the petro IPOs expected this month and Rs 2,000 crore coming by way of unified licence fee. But the fact is that deficit is down mainly because disinvestment proceeds have been taken as Rs 14,500 crore in anticipation of the GAIL and ONGC IPOs.

The real worry is that except corporation tax, the other heads of tax collections have declined and the revenue collections show a particularly weak link in the chain especially with the government in the ‘‘sop’’ mode.

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