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February 28, 2000
Reforms stopped mid-track, say industrialists
Zakia Maryam in Calcutta
The first Union budget this millennium has evoked a mixed reaction from the corporate world of Calcutta. The general view is that reforms have not been taken to their logical conclusion.
Industrialist B M Khaitan criticised Finance Minister Yashwant Sinha's decision to tax charitable organisations and raise taxes on dividends.
"While Mr Sinha took a bold step by dispensing with subsidies, there was absolutely no need to impose tax on charitable organisations run by corporate houses. After all, this was part of the social activities of corporate houses," he told rediff.com.
"What we had requested Mr Sinha was to do away with the 10 per cent dividend tax. However, he in his prudence chose to double it. This move will have drastic implications on the stock market in the near future. These steps were quite uncalled for," he added.
Indian Chamber of Commerce president K K Bangur, for his part, hailed the budget, saying the special thrust on knowledge-based industries, health care, education and venture capital funds would indeed augur well for the economy.
"This is evident in the 10 per cent increase in the maximum ceiling for the foreign institutional investment. By raising the ceiling from 30 to 40 per cent, the finance minister has paved the way for more and more foreign investments in India. Also, the decisions to close down nonviable public sector undertakings and restructure the weak banks reflect Mr Sinha's bold attitude towards bringing about the economic reforms in India," he said.
But the lopsided custom and excise duties, the increase in dividend tax, and the lack of specific action on subsidies irked many industrialists.
Sanjiv Goenka expressed his resentments on the FM's silence on the fiscal responsibility act. He pointed out that though Sinha had emphasised it in his last year's budget speech, he hadn't uttered a single word this time.
"I am also worried over his [Sinha's] mysterious silence on antiquated labour laws. The second generation reforms will never be achieved unless the labour sector reforms are pushed forward," Goenka said.
For industrialist C K Dhanuka, Sinha's "apathetic attitude" towards the ailing jute and tea industries of eastern India was disappointing. He is also puzzled as to why the FM did not clear the ambiguity over the newly-devised central value added tax.
Under this provision, a uniform 16 per cent excise duty has been levied with an additional special excise duty on selected products. Sinha has not named the products on which the SED would apply.
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