The budget is growth-oriented

Nanda Kasabe


Pune

This definitely was a budget to watch out for. Given the constraints in the wake of the recent earthquake in Gujarat, the industry was prepared for a harsh budget, but was pleasantly surprised by the proactive measures taken to ensure the country's growth cycle should not come to a halt.

Significantly, the BSE sensex rose by 146 points right after the budget announcement. In comparison, after the announcement of last year's budget, the sensex had gone down by 200 points. Yashwant Sinha, the Finance Minister who presented the Union Budget 2001 before the Parliament this morning, was quite clear that this would be a growth-oriented budget. There was a definite focus on strengthening infrastructure, agriculture and rural development and providing quality IT education. The budget ensures that the software industry would continue to sustain a high rate of growth.

For the IT industry, there were some sops that came as huge welcome, beginning with education. The minister announced 100 percent tax benefit for those going in for higher education with a special stress on technology institutes that are again eligible for tax benefits this year. The Indian Banks Association has formulated new loan schemes for students at low interest rates. For studies in India, students are eligible for a loan of upto Rs 7.5 lakh and those studying abroad can now get loans upto Rs 15

lakh.

In the area of forex transactions, Indian companies are now permitted to invest in foreign companies and raise overseas investments. The benefit of ESOP schemes in foreign owned companies can now make investments abroad. FIIs can invest upto 49 percent in domestic companies through portfolio investment. Both the fiscal and the deficit targets (at 5.1 percent) and revenue deficit target (at 3.6 percent) have been met.

The minister declared that the use of IT in the government sector has been maximized. Almost all the government departments from accounts, pension, passports will be completely computerized by March 31, 2002.

On the planning commission front, the task of preparing the Xth Plan has already commenced. All the existing systems will now be subject to zero-based budgeting and all schemes that are similar in nature will be converged. The special surcharge on corporate taxes has been removed. The government has also expanded the net of service tax to include banking and financial services, postal services, broadcasting, sound and recording, telex, vehicle repair services and online information and database retrieval.

27 PSUs will be disinvested including the VSNL. "The government was committed to the reduction of structural duties on the IT and telecom products by March 2003. Customs duties will be reduced to 15 per cent from March 1, 2001," said the Finance Minister.

On the IT sector front, units located at STPs are now eligible for tax benefits. Onsite services of IT units located in software parks are now eligible for deduction. ISPs and broadband networks are now eligible for a tax holiday of five years. The tax holiday is extended to units set up before March 2003.

The broad strategy this year, according to the minister, is to speed up agriculture reforms and better management of food, intensification of infrastructure investment, financial sector and capital markets, deepening of structural reforms, stringent expenditure control, rationalization of subsidies, and restructuring of

PSUs.

"This is the budget for carrying forward the second generation of economic reforms. This is the budget for growth. This is the budget for carrying forward the Indians in the new millennium," Sinha asserted.

Tarun Das, Director General, CII, gave the budget a rating of nine out of 10, especially since infrastructure was the key issue which would fuel higher growth. "The tax structure also reflects whatever we wanted."

Rahul Bajaj, former President of CII, was also pretty satisfied with the budget. "It could not have been better," he said, adding that measures taken in this budget would definitely kickstart the economy.

P Rajendran, COO, NIIT Ltd, was happy with the 100 percent tax benefit for IT related education. Satish Kaura, CMD, Samtel, however, was disappointed that there was nothing for the IT industry in the hardware sector. "It is a good budget but I am more worried about the implementation part of it."

(CNS)