Off-budget subsidies ‘a time bomb’

Off-budget subsidies ‘a time bomb’
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First Published: Mon, Jan 07 2008. 12 15 AM IST

Bitter critic: Yashwant Sinha. (Photo: Ramesh Pathania/Mint)
Bitter critic: Yashwant Sinha. (Photo: Ramesh Pathania/Mint)
Updated: Mon, Jan 07 2008. 12 15 AM IST
BIG PICTURE
M. Veerappa Moily, senior Congress leader who has headed both the revenue reforms and tax reforms commissions:
Bitter critic: Yashwant Sinha. (Photo: Ramesh Pathania/Mint)
“In keeping with the UPA’s policy thrust and the objectives laid out in the 11th Plan, this budget should not only sustain but help accelerate inclusive growth.”
Yashwant Sinha, former finance minister and a Rajya Sabha member of the Bharatiya Janata Party:
“This budget will be even more populist than the previous budgets of the UPA government. There will be the usual hyperbole about strengthening infrastructure, rural development and boosting agriculture, without any concrete plan. If the government has to raise fuel prices, for instance, it will do so before the budget.”
G. Srivatsava, head, economic policy, Confederation of Indian Industry:
“Building people, building India is the theme of our pre-budget memorandum submitted to the finance ministry and it fits in well with the government’s objectives this time. Education, health care, rural economy are all themes that are conducive to political consensus.”
FM’S CHALLENGES
Yashwant Sinha:
“The finance minister has everything to worry about if the subsidy bill has risen to Rs50,000 crore and the under-recovery for petroleum retailing companies is estimated at Rs85,000 crore.”
G. Srivatsava:
“The FM’s challenges are mainly long term, as to how best sustain the high rate of growth without letting inflation creep up.”
M. Veerappa Moily:
“The finance minister has to manage the inflow of capital better, along with currency exchange rate mechanism, both of which have not been managed well in the past year. Besides that, the global downturn needs attention.”
Bhartruhari Mahtab, member, Lok Sabha, Biju Janata Dal:
“The biggest challenge has to be a plan to boost small- and medium-scale industries. No economy can sustain such growth rates on the back of large industries alone.”
D. Raja, national secretary, Communist Party of India:
High expectations: D.Raja.
“We are disappointed with the previous budgets of this government. It has not met any of our demands. It has not reduced the tax burden on the common man or cut back excessive exemptions given to the corporate sector.”
BIG-TICKET ANNOUNCEMENTS
Bhartruhari Mahtab:
“Apprehending an early election, the government has already made the biggest announcement for the next budget, that the National Rural Employment Guarantee Act (NREGA) will be extended to the remaining districts.”
M. Veerappa Moily:
“The NREGA should get a big chunk of allocation. Besides that, the flagship Bharat Nirman programme should be accelerated.”
G. Srivatsava:
“This time, the FM has the best opportunity to boost skills development and research and development.”
FISCAL MANAGEMENT
Yashwant Sinha:
“The UPA government has not just mismanaged the fiscal situation but committed the fiscal fraud of keeping the rising subsidies off-budget. This is a time bomb that can only postpone the doomsday. But the attitude of this government is to last its term on the back of the glowing economy which it has done nothing to boost.”
M. Veerappa Moily:
“The budget must address issues like rising off-budget expenditure and monetary policy which hasn’t been managed well in the past year. The policy emphasis has to come from the budget itself.”
G. Srivatsava:
“The subsidies must come down to ease the fiscal situation. One way is to introduce a better, more direct system of providing subsidies.”
TAXES
M. Veerappa Moily:
“There is an economic case for reducing personal income taxes. When you cast the tax net wider, higher taxation is not needed. You get more and better quality of fish in an ocean than in a pond.”
Yashwant Sinha:
“Despite the buoyancy in tax collections, I don’t foresee a cut in taxes. That’s because the government’s expenditure is only rising and showing no signs of getting moderated.”
Dharmakirti Joshi, principal economist, Crisil Ltd:
“I expect further rationalization of direct taxes as the past reforms in this direction have been very rewarding for the exchequer. There is a possibility that some exemptions would go, allowing the finance minister to lower rates a bit.”
Gaurav Taneja, partner, Ernst and Young:
“In the area of personal taxation, the finance minister might increase the threshold of the income that is liable to be taxed. An increase is necessary as a cushion against inflation.”
S. Madhavan, executive director, PricewaterhouseCoopers:
“Product exemption in excise might be pruned.”
Gurudas Dasgupta, leader of the Communist Party of India (Marxist) in Lok Sabha:
“We want the finance minister to increase the taxes on those who can afford to pay more, that means the wealthy and the corporates that are getting away with a host of exemptions.”
AGRICULTURE
M. Veerappa Moily:
Cautionary note: M.V.Moily. (Photo: Ramesh Pathania/Mint)
“It is time to do more to boost production of cereals, pulse, foodgrains. There has to be greater emphasis and plan for agriculture. The budget must sow the seeds for a second green revolution.”
Bhartruhari Mahtab:
“We can expect some selective declaration on agriculture in the budget rather than a comprehensive plan because the government has already unveiled a policy for farmers.”
CONCERNS
M. Veerappa Moily:
“Exports, and therefore jobs, have been hit on account of the appreciating rupee. Though this is a monetary policy issue, the budget must provide the much-needed direction.”
Yashwant Sinha:
“The Pay Commission report is due next year. The government will either accept it or provide a hefty interim relief. Either way, the government will have to bear the expenses. And this will be on top of the persistent rise in the government’s expenditure.”
Bhartruhari Mahtab:
“Big-ticket programmes such as the National Rural Health Mission and the Sarva Shiksha Abhiyan require the states to match the sum promised by the Centre. However, several states can’t afford to put in 50%. So such schemes, though they make an impact in the budget speech, simply don’t get implemented.”
Arindam Banik, professor of international economics and finance, International Management Institute, New Delhi:
“You can sustain a rural programme for employment and education provided it is matched by a rise in agriculture productivity. The productivity of Indian agriculture has been low and stagnant for long. So the fiscal expansion will just create a price rise. And it is anybody’s guess how long the RBI will keep sorting this out.”
Paromita Shastri, Sanjiv Shankaran and Pragya Singh contributed to this story.
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First Published: Mon, Jan 07 2008. 12 15 AM IST
More Topics: M.V.Moily | Yashwant Sinha | D.Raja | Budget | Populist |