The Telegraph
Since 1st March, 1999
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A question of reform timing
- Budget may not be a battle

New Delhi, Feb. 27: Palaniappan Chidambaram is the man the country's Left politicians love to hate.

In the run-up to the budget, the finance minister has been quietly doing what is anathema to them ' reforms in areas which they do not want him to touch, such as banking.

Chidambaram softsoaps the Left at all meetings, but does not do its bidding. He had made his reformist resolve clear in last year's budget speech. He quoted the Tamil poet Thiruvalluvar to say, roughly, the king shall consult all, but take decisions alone.

That budget saw layers of duties being compressed and announcement of higher foreign investment limits in telecom, insurance and aviation.

The signals were clear even then. Despite the communist parties on whose support the Congress-led government lives, reforms would continue.

But the big question is will he announce big-ticket reforms in this year's budget'

Perhaps and perhaps not. He has already demonstrated he does not need to use the budget to announce reforms, which can happen at any time.

The time zone for the war between pro- and anti-reform camps has shifted from the budget month and been spread thin over the whole year.

Chidambaram's budget, consequently, is expected to be far more subtle than the 'dream budget' he came out with when he was finance minister in the United Front government in 1997. That budget carved out a place for him in history by gambling heavily on lower taxes generating greater compliance.

It will promise a new deal for the rural poor by offering more jobs, higher spends on healthcare and education, insurance for farmers, better housing, drinking water and sanitation.

In other words, this will be a remodelled 'Garibi Hatao' programme which his party leader's mother-in-law Indira Gandhi coined in 1971.

Not that the finance minister is likely to give reforms a total miss. He has already said duties ' customs and excise 'will be cut close to Asean levels to make industry more competitive.

The long-awaited nation-wide value added tax regime which scraps existing state duties to bring in new uniform rates will figure in the budget as it is slated to be brought in from April this year.

Along with a cut in duties, tax exemptions ' available to industry and individuals ' are likely to be reduced.

The need to prune tax exemptions and consolidate schemes which give concessions also stems from a legislation Parliament passed ' much to the dislike of the Left ' the Fiscal Responsibility and Budgetary Management Act. This forces the government to cut the gap between expenditure and income.

The deficit has been 5 to 6 per cent of the GDP in each of the past five years. Chidambaram is likely to spring a surprise this year by containing it at or below the budgeted 4.4 per cent.

An unexpected growth spurt in economy has seen the GDP expand beyond expectations. Despite lower than budgeted revenue collections, the higher GDP and the fact that most ministries were unable to spend the money allocated to them last year have helped him spring this 'A' grade on his report card.

Love or hate him, as he rises tomorrow at 11.00 am to present his third budget, most will have to admit fortune favours the reformer.

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