The main interest in this year's Budget hovered around the measures to curb fiscal deficit to reasonable levels and to boost investment and savings. Most, if not all, unbiased and informed experts have found the steps taken to be reasonable and necessary, if not sufficient. The Finance Minister seems to have done just enough to avert a downgrade by the rating agencies and has promised more steps during passage of the Finance Bill.
In his Budget speech, the finance minister said that his greater worry is the current account deficit (CAD) that continues to be high mainly because of our excessive dependence on oil imports, the high volume of coal imports, our passion for gold, and the slowdown in exports. To bridge the deficit, we have to encourage foreign investment that is consistent with our economic objectives, he said. However, he did not outline any specific steps to reign in CAD. He merely said that he looks forward to the changes that will be made to the Foreign Trade Policy (FTP) next month and assured his support to measures that will be taken to boost exports of goods and services. In his press conference, he said that the only way to contain CAD was to increase exports as imports like oil and food cannot be eliminated.
The finance minister has changed the Customs and excise duty rates only on a few items. Imports of specified machinery for leather industry, pre-forms of precious and semi-precious stones, goods for manufacture, repair and overhaul of aircraft, bituminous coal etc attract less duty, whereas imports of raw silk, set-top boxes, some luxury goods, etc attract higher duty. Export duty is imposed on ilmenite and withdrawn on de-oiled rice bran oil cake. Zero excise duty route option is restored for cotton and manmade (spun yarn) at the yarn, fabric and garment stages. Duty concessions are given to handmade carpets and textile floor coverings of coir or jute, ships and vessels etc and duties are raised for some tobacco products, sport utility vehicles, marble, silver manufactured from smelting lead or zinc, mobile phones etc.
Among the changes mooted in the Finance Bill, the proposals to give power to a single member of a tribunal to decide cases up to Rs 50 lakh, to allow resident public companies to seek advance ruling and to allow tribunals to grant a further stay of 185 days, if the stay application is not decided within the initial 180 days due to no fault of the taxpayer, are helpful moves. The proposal to limit the period for which goods can be deposited in a warehouse under Section 49 of the Customs Act, 1962, and let the importer seek month-to-month extensions is a restriction that many importers will find rather unnecessary.
I am surprised that no attempt has been made to either rationalise or reduce the plethora of exemptions or even amend or up-date the redundant or defective notifications. A critical review of the notifications has not been done. The exemption Raj continues.
Finance Minister P Chidambaram had promised a responsible Budget and by all accounts has been prudent and restrained. However, his backup team in the Central Board of Excise and Customs (CBEC) seems to have taken the easy route of not doing anything unless directed by the finance minister.
Email: tncr@sify.com
