Biting the bullet is not easy
New Delhi: Despite all the tough talking being done in political circles prior to the finance bill being presented in parliament, the final outcome has shown that it takes more than just plain talk to bite the bullet.

While the Budget 2000 has attempted to tackle the serious economic issues to some extent, the most critical of the issues – the fiscal deficit – has been dealt with very softly. No firm measures were announced to deal with this yawning gap, officially pegged at 5.1 per cent. Clearly, coalition politics has ruled the day, with the government not wanting to antagonise its ruling partners with harsh budgetary measures.

The only seemingly bright spot is the appointment of an expenditure reforms commission, which has been mandated to look into the process of downsizing the government administrative machinery is a progressive manner. The commission has also been asked to look into the subsidy regime prevailing in the country by examining their rationale for continuance and make recommendations for more transparent subsidies.
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Public sector banks under microscope
The announcement by the finance minister that government holding in public sector banks will be lowered to as low as 33 per cent, is likely to cause a great churn in the normally staid public sector banks.

The first moves towards giving the banks greater autonomy was made some months ago when the government never filled the vacancies in the boards of public sector banks caused by the expiry of the terms of politically appointed directors. Now comes the move to reduce the government holding to 33 per cent.

Besides calling for greater public accountability of such banks, this move will help banks raise funds from the public to meet the capital adequacy norms.

Political compulsions, however, have made the government issue a clarification that reduction in shareholding will not mean that management control will be ceded. It has also categorically stated that weak banks will not be closed and that the interests of the employees will be fully safeguarded.

Operationally, banks will find the going tougher with the cut in the provident fund rates that is likely to squeeze their margins.
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Disinvestment target at Rs. 10,000 crore
Notwithstanding the dismal disinvestment record of the government in the last fiscal, the finance minister has retained its disinvestment target for the current fiscal at Rs. 10,000 crore. The minister has proposed that the entire proceeds of the disinvestment be used for meeting expenditure in the social sectors, restructuring of the public sector and retiring public debt.

The government, according to the finance minister, will not shy away from reducing its holding to below 26 per cent in non-strategic public sector units.
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