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June 1, 1998


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'It's a very motivating Budget'

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Leaders of Indian industry reacted differently to the Budget, but many of them were warmly supportive of it. Here is what some of them had to say:

K K Modi, president, FICCI

It has been a bold and courageous Budget, fitting for a country in the 50th year of Independence.

It is a Budget that is independent and has given respect to the Indian citizen.

It has been a path-breaking Budget because it has spread the base of the tax payer. Initially, short term measures resulted in losing the confidence of the tax payer. By not raising corporate and individual tax, the FM has induced confidence in the tax payer.

By increasing the defence budget by 14 per cent and focusing more on growth, he has proved that this is not a nuclear Budget.

Vijay Kirloskar, vice-president, Confederation of Indian Industry

This Budget has taken many bold steps -- opening up of insurance, privatisation of PSUs, including Indian Airlines, increasing investments of NRIs to bring in FDI capital and also using of part of the provident fund for private industry, which are graded.

Plans to spend money on infrastructure, including housing, drinking water and roads is a laudable step.

Excise duties have been organised to look after and help the industries. Simplification of the tax code, including excise, is welcome.

It is a very, very encouraging Budget. The resources have to used, the allocations, Rs 200 billion plus the sovereign guarantee is given for the eight fast track projects, which too should help the economy.

Subodh Bhargava, Chairman, Eicher group

Overall, the Budget is bold on outlays focussed on infrastructure, increase of Rs 110 billion with significant increase in sectors like power, telecom, transport, roads, and housing should give demand stimulation leading to growth in the medium term.

The second feature is deep structural corrections or rationalisation signals, such as the opening up of insurance disinvestment in PSUs --- in Indian Airlines to below 51 per cent in three years -- and below 26 per cent in non-strategic areas.

Also, with public sector banks, non-performing assets, the FM seems to have tackled the root cause for correction in the long-term widening of the tax base with no change in direct taxes -- a very welcome message of stability. There are several other measures of rationalisation, simplification and transparency.

The fear is pressure on inflation, with the increase in customs and excise.

Vinay Rai, Chairman, Usha India Ltd

The Saral, Samadhan, Samman schemes are all innovative.

The surcharge of eight per cent countervailing import duty hits most people who are paying low import duties on basic raw materials. Hence, it's not uniform.

I would say overall, this has been a rational Budget in difficult circumstances. Emphasis on infrastructure, education, and housing is commendable. It is not a popularist budget; it will certainly spurt demand and hence lead to growth.

Recognition of IT as an important medium to increase exports and give employment to the educated is timely. India can truly be a global player in IT solutions worldwide.

Sunil Mittal, Chairman, Bharti Telecom

I think it's a very motivating Budget. I believe half the battle is won if the industry is motivated. There is a very strong emphasis on infrastructure, with a 35 per cent increase in outlay. Strong signals have been sent for investments in this vital area.

It sends very strong signals, there's a blend of pride for the Indian business community and an invitation to foreign companies to participate in the Indian economy. There's a special place for NRIs in this Budget, and I do hope that NRIs will invest in large measure back into the homeland.

Vijay Kapur, advisor, Usha India Limited

Surcharge on imports: The implications of this have to studied in detail. By and large, it has looked after agriculture which is a good sign, and we hope that this accent on SSI will increase the industrial base. Overall, sticking to 5.5 per cent financial deficit is definitely something good for us. Unexpected, but we hope that it would be maintained.

NRIs have been well looked after both with respect to incentive for investment and almost what is tantamount to a second passport -- the PIO -- and also with respect to the speedy clearance of FDIs.

The NRI should be happy and we hope that there would be an increase in investment by them.

V K Mathur, Chairman and MD, Inapex Ltd

Frankly, no Budget by itself can itself kickstart the economy. There are a large number of factors external to the government and administration. Traditionally in India, the Budget seeks to set the tone and it is for the rest of the sectors of the economy as well as the international community to respond.

K G Ramanathan, Chairman and MD Indian Petrochemicals

I think the Budget is a good one, given the circumstances in which it has been presented. Specifically, I feel that there are two or three points:
1. It has carried forward the reforms process started nine years back.
2. It has not tried to meddle with the programme of progressive reduction of tax rates, direct and indirect. The boost to the industry will come from a level playing field and release some burden from the domestic industry. That is, by equating the burden the domestic industry is having vis-a-vis imports.

The thrust given to the housing sector and rural sector will increase purchasing power and demand, is essential in the current economic scenario. We are trying to prioritise the government expenditure more towards the social responsibilities of the government, for example by reducing the equity to 26 per cent

K Mahesh, MD Sundaram Brake Linings Ltd

The abolishment of the Urban Land Ceiling Act is a welcome measure. Though the Budget talks about approximately 40 per cent in the energy and the communications sector, the figure indicated for the national highway is a paltry Rs 5 billion, which is going to impede growth of the automobile sector.

It is a welcome break that the private sector is being allowed into the insurance sector, but they have stopped short at allowing the foreign sector into this sector.

What is surprising is that the excise duty for multi-utility vehicles, which are ideal for Indian roads, has been increased by five per cent, whereas the industry was expecting an across-the-board reduction on excise duty on all vehicles.

The government finally seems to have faced up to the fact that sick units needs to be closed. And the handshake is a very generous one. I only hope that the government will carry through the proposal. I think it is nice to see that priority is given to agriculture and irrigation and also to development of rural infrastructure. This would help NABARD finance farmers to buy tractors and agricultural implements.

It is a positive step that all foreign investment over Rs one billion will be treated on a priority basis with a liaison officer at the centre to clear all hurdles at the Centre.

It is unfortunate that the government had to increase the import duty by eight per cent across the board. And I hope that it is one-time measure or a stop gap arrangement. But it is worthwhile to note that crude oil, newsprint and imports for export production are also exempted. The inverted duty structure in the engine and engine parts have been partially corrected, which will in some way encourage the vehicle manufacturers to localise the engines.

A S Kasliwal, former president, FICCI

Going through probably one of the longest Budget speeches ever, one feels proud to be an Indian, both as an individual and as an industrialist, as a businessman.

This Budget started with its emphasis on agriculture, rural development, education, medical facilities etc and allocated large sums of funds for their development.

From a practical point of view, the acknowledgement by the FM of the difficulties suffered by businessmen from inspectors, the adjustment of thought processes of the previous FM and himself in terms of FERA and FEMA, and various other provisions make this a broad-minded Budget which gives you a sense of self-respect.

Duty-wise, one should feel relieved to see this rosy and bright budget.

All the businessmen spoke on the Rediff Budget Chat

Budget '98

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