New Delhi, Feb 28 (UNI) The strong pitch that the Economic Survey 2007-08 makes for reforms in various critical areas will help convince global investors that the India growth story is intact, while creating space for populist measures in the Budget to be unveiled by Finance Minister P Chidambaram tomorrow.
The reform measures that have been outlined in the Economic Survey tabled today in Parliament are mostly those that the UPA government has not been able to carry out because of the nature of coalition politics. These include raising FDI cap to 49 per cent in insurance, FDI in retail, and disinvestment of profit making non-navratna PSUs.
The underlying message of the Survey is the import of widening the ambit of reforms. In this regard it has suggested permitting 100 per cent FDI in greenfield private rural agriculture banks, phasing out controls on sugar, fertilisers and drugs and private management of public transport in metros and large cities.
There are many other areas outlined by the Survey which will undoutedly be difficult to undertake in the world of India coalition politics.
The government is well aware that the reform agenda doled out by the Economic Survey will meet with stiff resistance from the Opposition and Left parties, as has been an experience in the past.
Analysts say that these pronouncements would certainly not be viewed kindly by these parties in view of elections to ten state assemblies this year and the general elections thereafter.
Mr Chidambaram has become synonymous with India growth story and has projected his and his party's reformist image to investors by outlining these steps.
Political pundits say by offering a bonanza to farmers and marginalied groups, the government will send home the meassage that the Congress led government is the best bet to prosperity and socio-economic upliftment. This is regarded as vote catching measure.
While keeping the income tax rates unchanged, Mr Chidambaram in his Budget is expected to undertake a dextrous fiscal exercise which would ensure that the growth momentum is maintained in the face of a global slowdown, inflation is kept under check, copious capital flows are moderated and the heightened hopes of a people-oritented budget are met.
Notwithstanding the difficult choices, Mr Chidambaram's fiscal strategy would need to reflect the Congress Party's wishes, the country's expectatant mood on tax changes, special focus on farmers, small scale industry, primary education and health, massive job creation and sops to industry in the wake of robust growth in revenues, In the substantial step up in Gross Budgetary Support(GBS) of the order of Rs 2,50,000 crores, States are expected to be the major beneficiaries of this-- garnering a 23 per cent increase, with Central Plan going up by a mere 15 per cent. The applecart is to be tilted, to take the wind out of scathing criticism of the BJP ruled States that the Centre was meetig out step motherly treatment to them.
There are, however, several ways in which the Finance Minister can lighten the tax burden on the common man to prop up consumption and eventually investments. For instance, he can readjust the income slabs, modify the range of other levies like surcharge and cess and liberalise some of the peripheral tax measures applicable to the corporate sector.
Industry is also expecting that Mr Chidambaram may clarify fiscal policy with rergard to Special Economic Zones, Export-Oriented Units and Software firms-- the long pending demands of India Inc.
The robustness of tax revenues has raised hopes that there may be sops in the Budget for the industry.
Informed sources say there will not be any major schemes in the Budget, even as the Finance Minister will allocate nearly Rs 1,10,000 crore for the 27 flagship programmes.
All in all, the Finance minister may be killing two birds with one stone-- won the confidence of the domestic and international investors and cater to the commonman in his Budget.
UNI GS MS GC1936