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February 29, 2000
Budget favours traditional, infotech industries
The Union budget for the year 2000-01 presented in Parliament today aims to strengthen the foundations of the rural economy and nurture the growth potential of the knowledge-based industry, modernise traditional industries like textiles and agro-processing, and sustain efforts to remove infrastructure bottlenecks.
It gives priority to human resource development, strengthening of the external sector, high foreign investment and establishing fiscal discipline.
Finance Minister Yashwant Sinha announced an increase of Rs 111 billion support to the Ninth Plan, raising it to Rs 881 billion. The central plan outlay has been increased from Rs 1035.21 billion to Rs 1173.34 billion.
To curb the growth of non-plan expenditure, the finance minister announced initiatives, including zero-based budgeting for all ongoing schemes. As a result 69 schemes are to be discontinued or merged with others. This process is to be completed in a time-bound manner.
The finance minister liberalised the tax regime for the capital market. Now on the Securities and Exchange Board of India will be the single-point nodal agency for guidelines.
Indian firms are to get greater flexibility to undertake capital account transactions, especially to acquire businesses in the knowledge-based sector abroad.
The access of Indian companies to foreign portfolio investment and the automatic route for overseas investment has been liberalised.
The finance minister raised the defence allocation from Rs 456.94 billion last year to Rs 585.87 billion.
The finance minister has opted for better distribution of subsidies. So fertilizer subsidies are to be rationalised and allocation of foodgrains to families below the poverty line has been doubled under the Targeted Public Distribution System. Sugar will not be allotted under the PDS to income-tax payers.
The finance minister announced reforms in the public sector, saying government equities in all non-strategic public sector units would be brought below 26 per cent.
All PSUs that cannot be revived are to be closed down, but the workers' interests will be protected, he said. Potentially viable PSUs will be restructured and revived.
New initiatives for the universalisation of elementary education will include a new scheme, the 'Sarva Shiksha Abhiyan', to enable enrolment of all children by 2003.
The National Literacy Mission is to be revamped to achieve 75 per cent literacy by 2005. A new scheme, the 'Pradhan Mantri Gramodaya Yojana', is to be launched to implement time-bound programmes for rural people. The scheme will get Rs 50 billion.
Referring to the deteriorating financial condition of state governments, Sinha called for collective measures to ensure fiscal reforms in the states.
He said the manpower requirements of government departments would be reassessed and the norms for posts being created reviewed to keep recruitment to a minimum. He also proposed a Voluntary Retirement Scheme for surplus staff.
All subsidies will be reviewed and no new autonomous institutions will be created without Cabinet approval. Budgetary support to them will be kept to a minimum. Rs 10 billion of the divestment proceeds have been earmarked for debt service payment.
The finance minister also announced a lowering of the interest rate on the General Provident Fund by 1 per cent, to 11 per cent, with effect from April 1, 2000.
Sinha also announced several steps to boost small-scale industries. The limit of collateral-free loans for the tiny sector has been increased from Rs 100,000 to Rs 500,000. The composite loan limit for the Small-Industries Development Bank of India and other banks for small borrowers has been raised from Rs 500,000 to Rs one million.
The Khadi and Village Industries Commission will introduce a common brand name for its products. A professionally managed marketing company is to be set up for the purpose.
The finance minister announced that the government would not close any public-sector bank. But weak banks will be restructured. Banks will be allowed to raise capital from the market to expand operations and meet capital adequacy norms. More debt recovery tribunals and debt recovery appellate tribunals are to be set up. A new deposit insurance bill will replace the existing Deposit Insurance and Credit Guarantee Act, 1961.
Rs 5 million have been provided in the budget for the Technology Information Forecasting and Assessment Council to take up technology projects and boost co-operation between the universities and institutions involved in research and development. An equal amount has been provided to ensure India's technology's leadership initiative in the new millennium.
The finance minister has taken care to provide social security to the poor and to assist rural housing. A new group insurance scheme, the 'Janshri Bima Yojana', is to be introduced to provide social security. The insurance cover will be Rs 20,000 for natural deaths and Rs 50,000 in the event of accidental death or permanent disability and Rs 25,000 for partial permanent disability.
Sinha earmarked Rs 1 billion additional equity support to the Housing and Urban Development Corporation to build 900,000 houses. The National Housing Bank will provide refinance for the construction of 150,000 houses under the Golden Jubilee Rural Housing Finance Scheme.
Other initiatives include assistance to provide 100,000 houses for families that have an annual income below Rs 32,000, providing 2.5 million dwellings in rural areas. The Indira Awas Yojana is to provide more than 1.2 million houses for people below the poverty line with Rs 15.01 billion being provided for this purpose.
The finance minister said a task force, headed by an eminent person, would be set up to review all existing legislation and government schemes pertaining to role of women in the economy. It would chalk out specific programmes to observe 2001 as women's empowerment year.
To rev up the national population policy that intends to bring down fertility rate to replacement levels by 2001, Sinha increased the budget of the department of family welfare from Rs 29.20 billion in 99-2000 to Rs 35.20 billion.
The plan allocation for Indian system of medicines and homeopathy has also been doubled, with an emphasis on drug standardisation, quality control, and modernisation of colleges, drug-testing laboratories and formulations.
The minister said the government would go ahead with programmes of corporatisation of public sector service providers in the area of telecom, ports and airports next year.
He said the plan outlay for central public sectors had been increased from Rs 76.26 billion to Rs 91.94 billion. Increased budgetary support has already been made for the Tehri and Naptha Jakhri hydro projects so that they can be commissioned by March 2002.
Sinha said a new scheme would be introduced to provide assistance to state utilities. Under the scheme, additional central plan assistance of Rs 10 billion would be provided to states and union territories.
To get over the problem of the large amounts that state electricity boards have yet to pay central sector power and coal utilities, a scheme for securitisation of these duties with the support of central government had been finalised. The central support will be linked to reforms of SEBs.
The government has approved the undertaking a detailed feasibility study and environmental impact assessment of the Sethu Samudram ship canal project.
The finance minister made special provisions for the north east region. The include technology mission, for horticulture development in these states and provision for 50 more industrial training institutes and 446 computer information centres during the next two years.
To encourage knowledge-based industries, the finance minister has proposed major liberalisation of the tax on venture capital funds.
To simplify procedures, the Securities and Exchanges Board of India will become the single-point nodal agency for registration and regulation of both domestic and overseas venture capital funds. The liberalisation will make it easier for non-resident Indians to invest capital, knowledge and enterprise in ventures within the country.
Sinha said the government was committed to encouraging Indian firms and business aiming to be strong India-based multinationals.
To promote this trend, the government further liberalised the policy for acquisition of companies abroad, allowing Indian corporates in the knowledge-based sector to undertake capital account transaction to acquire businesses abroad more easily. The ceiling under the automatic rule for Indian corporates has been increased to 50 million dollars from the existing 15 million dollars.
To give Indian companies greater access to foreign portfolios, the finance minister increased the limit on foreign institutional investors to 40 per cent.
Under the existing policy on portfolio investment, FIIs are permitted to invest in a company, up to an aggregate of 25 per cent on equity shares, which can be increased to 30 per cent subject to approval of board of directors.
The finance minister said that India would put on a sustained and equitable job-creating growth path of seven to eight per cent a year to banish poverty in the next 10 years. This, he said, would be a decade of development.
He said India needed to strengthen the foundations of growth of rural economy, especially agriculture and allied activities, and to nurture the revolutionary potential of new knowledge-based industries like infotech, biotechnology and pharmaceuticals.
Sinha said traditional industries like textiles, leather, agro-processing and small-scale industry sector would have to be strengthened. Infrastructure bottlenecks in power, roads, ports, telecom, railways and airways must be strengthened through rapid growth of exports, higher foreign investment and prudent external debt management.
The minister said highest priority would be given to human resource development, with policies on education, health and other social services being formed, with special emphasis on the poorest and weakest sections of society. Finally, he said, a credible framework would have be established to ensure fiscal discipline, without which the other elements would fail.
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