The Telegraph
Since 1st March, 1999
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A perfect 10 on play-safe
Half an eye on polls, half on economy

New Delhi, Feb. 28: If valour is a soldierly quality and discretion the badge of the diplomat, Jaswant Singh has allowed the major in him to lie low.

With polls in several states scheduled for the end of the year, possibly accompanied by a general election, and an economy muddling through, the finance minister has chosen the path of least damage.

He has presented a budget that offers a series of concessions, such as withdrawal of the national security surcharge of 5 per cent on income-tax and reliefs for pensioners, but has punctuated them with a hit here and a pinch there. For instance, the small-savings interest rate is down 1 percentage point and there is a cess on diesel and petrol.

By the end of the day, banks had cut the savings-account rate by half-a-percentage point to 3.5 per cent, and oil companies had raised prices of petrol and diesel by around Rs 1.50 per litre.

Singh could have been more populist and slaughtered economic interests at the altar of electoral compulsions. Or, otherwise.

Apart from some economists, concerned over the gap between government revenue and expenditure — the fiscal deficit, projected at 5.6 per cent of the estimated gross domestic product — there weren’t too many unhappy faces around. There wasn’t an outburst of euphoria either, except within industry segments that would benefit from a lowering of excise duty, such as cars and soft drinks.

Business lobby CII’s president Ashok Soota said: “This budget takes into account almost all of the chamber’s recommendations and, in fact, has exceeded our expectations.” He didn’t miss the opportunity to caution about the fiscal deficit, though.

His counterpart in Assocham, R.K. Somany, however, said: “The opportunity to give a fillip to the capital market has been missed and the issue of boosting rural employment has also not been addressed.”

The market reflected the budget mood by staying flat: the Bombay Stock Exchange sensitive index ended up six points higher at 3283.66. Neither thumbs up nor thumbs down, despite the minister having addressed a long-standing demand for not taxing dividend income in the hands of the recipient. The tax, at 12.5 per cent, will now be paid by the company distributing the dividend.

Even the budget numbers are unexceptionable. Singh raises Rs 3,294 crore through his new tax measures and surrenders Rs 2,955 crore in giveaways, which is almost revenue neutral.

His party has found little to complain about, except the increase in the urea price in a bid to cut fertiliser subsidy. “We want the government to think seriously about urea and fertiliser prices,” BJP president M. Venkaiah Naidu said.

This could be a sticky point for Singh but he has made the party happy by lifting the two-year freeze on leave travel allowance for government employees.

Singh has accepted the party’s demands to continue with housing loan concessions and raise the standard deduction to calculate taxable income. The doubling of the income tax surcharge — withdrawn for others — for individuals with an income of over Rs 8.5 lakh a year is going unnoticed politically because this section of society is considered privileged.

The corporate tax surcharge has been halved to 2.5 per cent, peak customs duty cut from 30 to 25 per cent and excise rates rationalised to three slabs, 8, 16 and 24 per cent, as a result of which some commodities will cost less.

Describing his budget as one for an “India that is on the move”, Singh announced infrastructure projects worth Rs 60,000 crore. Who will invest this money' Not the government, but a “public-private partnership”. Why should the private sector invest in infrastructure' No answer.

For those who are looking for innovation and haven’t spotted any, here’s a reminder: unlike always, the budget speech had no Part A and Part B. It came in one part, 135 minutes long.

And, yes, the import duty on conch shells has been cut, trumpeting the coming polls.

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