Reforms with a human face

COMMENT/ Arvind Virmani, Director & CE ICRIER

The Budget has progressively elaborated the concept of "reforms with a human face."

In the process, it has also dispelled the notion that focusing on the poor, farmers and the unemployed will mean huge subsidies, fiscal irresponsibility and large deficits.

The government has made it clear that it intends to meet the targets of the Fiscal Responsibility and Budget Management Act.

The counterpart to this, on the expenditure side, is a cautious emphasis on the expenditure side of the budget, particularly expenditure on agriculture, rural development and social sectors.

This year's reform actions in the budget are in the telecom sector, 74 per cent (from 49 per cent), insurance, 49 per cent (from 26 per cent) and civil aviation, 49 per cent (from 40 per cent).

This follows the earlier cabinet decision to proceed with private entry into the development and management of the Delhi and Mumbai airports with 49 per cent FDI.

The first step of modifying the service tax to allow off-set for both goods and service taxes paid is a good first step.

The anti-reform action is the removal of textiles from CENVAT. Controversial moves include the tax changes relating to removal/reduction of capital gains on securities and its replacement by a turnover tax on securities transactions and the manner of reducing income tax on individuals with taxable income less than Rs 1 lakh.

Both these are likely to have unpleasant long term consequences even if they appear successful in the short run.