labels: economy - general, union budget 2004 (feb 2004)
Jaswant brings good tidingsnews
Our Economic Bureau
11 January 2004

Jaswant SinghMumbai: He is different, he stands out and he has plenty of form, substance and panache. Last week Finance Minister Jaswant Singh, in his quiet and unobtrusive way delivered a triple whammy. He announced major import duty cuts and a series of tax- payer friendly measures that is being termed as a mini budget. Good politics, good economics and the reforms process goes on.

To woo the middle class, Singh has exempted salaried employees with an annual income of less than Rs 1.5 lakhs and pensioners from filing returns. He also made it easy for taxpayers to furnish paperless returns through the internet and linked interest rate on housing loans to the prevailing market rate for perquisite valuation.

Pensioners have also been exempted from the purview of the one-by-six scheme, which means they do not have to file returns if they have no taxable income.

The Finance Ministry has halved the customs duty on cell-phones to 5 per cent, while also making air travel, computers and VCD/DVDs substantially cheaper. Air passengers will no longer have to fork out pay the 15 per cent Inland Air Travel Tax and Rs 500 Foreign Travel Tax. Further, the excise duty on aviation turbine fuel has been halved to 8 per cent.

A similar excise cut has been effected on personal computers, even as laptops brought as part of baggage have been made totally duty-free. There will be no excise imposed from now on recorded video compact discs and digital video discs. The quantum of liquor importable duty-free through the baggage route has been doubled to 2 litres.

The Finance Minister has also announced funding schemes for farmers, rural housing and sanitation, small and medium industries and educational loans for students, which entail funding by appropriate agencies at 200 basis points lower than the prime lending rate.

Singh has also announced a 'Dada-Dadi' bond scheme for senior citizens above 60 years of age that will carry a rate of interest higher than the prevailing market rate. This measure is to placate the aged and pensioners, who have been finding it difficult to pull on with falling returns on their life savings.

To cosy up to manufacturers who apart from being voters are a major source of poll funds, the Finance Ministry has slashed the peak rate of customs duty on all non-agricultural goods from 25 per cent to 20 per cent, and scrapped the special additional duty of customs of 4 per cent currently levied on goods imported by manufacturers.

Further, sectors such as steel, power and health have been provided sops by way of lower duties on inputs. The customs duty on non-coking coal has been reduced from 25 to 15 per cent. Similar cuts have been administered on nickel (from 10 to 5 per cent), electricity meters (from 25 to 15 per cent) and imports for power transmission and distribution projects (from 25 to 10 per cent).

The customs duty on specified life-saving bulk drugs, formulations and medical equipments have been lowered to 5 per cent, while also making them exempt from payment of countervailing duty.

To develop infrastructure, a package would be evolved with a mix-match approach of external commercial and domestic borrowing and capital would be provided speedily at rates 200 basis points below PLR. Towards this end, an aggregate additional investment of Rs. 50,000 crores would be catalysed over the next three years in infrastructure and manufacturing projects like power generation, sea ports, airports, roads, tourism, telecommunications and urban infrastructure. To the extent necessary, the Government would provide financial guarantees, appropriate risk mitigation measures and other financial resources. The details of the fund would be finalised by March 1 this year.

The hit the government will be taking is a whopping Rs 10,000 crores and the government is cool about it. According to Singh the duty cuts announced would spur the economy to a higher growth orbit and the revenue loss from the measures would be "temporary".

"Every taxation measure has certain implications. Loss of revenue would be temporary. The steps have not been taken in a fit of amnesia. We have calculated all aspects. The totality of steps are very positive," the Finance Minister said.

He said that the measures were aimed at providing a further push to already buoyant economy.
"The economy is in a roll. The Government reviewed the situation and felt that there was need to take steps to push the entire economy further. I am confident that the measures would greatly enhance growth," Mr Singh said.

'Way to go,' is what every farmer, housewife, industrialist, student and 'Dada-Dadi' should be saying. Elections or no elections, if the economy is on a roll and goodies are available there is no harm in handing them out. The year 2003 is proving that lower taxes lead to growth and the measures which have been taken are in line with the reforms process.

Criticisms over Singh's gift hampers expectedly did come from the opposition, mainly the Congress party. The Congress spokesperson, the loquacious Jairam Ramesh for once appeared to be at a loss for words. He pointed out the reforms philosophy had been introduced much earlier and growth has been an ongoing process. He added that it was not that suddenly in the year 2003 the economy turned around and is on a roll.

To be honest, Jairam Ramesh is correct but at the moment of going online, no one is listening.

also see : Mobile handset prices likely to drop 8-10 per cent
Air fares will drop by 12 to 15 per cent
PM lifts ceiling on overseas investments
FM pleases the electorate again
Life saving drugs to cost less
A mini budget

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Jaswant brings good tidings