Budget Watch: Series 1

The budget 2008-09 is being prepared and there are several critical issues that need to be addressed if the economy is to be saved:

• Despite an encouraging growth of five to six per cent for the fiscal year 2064-65 BS, which by no means can be discredited, only the manufacturing sector has recorded de-growth. And, without the manufacturing sector performing, sustainable long term employment will always be a problem.
• Exports to India and other countries have declined. As a result, the balance of payment with India has suffered seriously resulting into more than Rs 2 billion Indian currency being paid in hard cash.
• Fuel costs are rising and that will have a significant impact on cost of production and transportation.
• No attention was given in the past to corporatise agricultural sectors. Unless it is made attractive enough for business houses and corporates to enter, this sector will continue to under-perform.
• Farmers continue to pay interest to the tune of 12 per cent whereas consumers who buy vehicles and white goods get consumer financing at about seven per cent.
• The state subsidy is completely concocted and does not reach the targeted levels. For example, the huge subsidy on fuel which is being given across the board to everyone. However, this should be aimed at limited to people through public distribution system/rationing. Likewise, some other essential items can also be included as a part of this. There is nothing wrong in developing a PDC in a poor country like ours.
• Decision making and implementation of declared policies in the past is a serious issue. Without clear accountability, no budget or annual programmes can deliver the desired results.

Some specific areas that need to be addressed in the budget;
• Arrest the decline of exports to India.• Provide incentive to raise production aimed at exports to Indian states including the North-east and Tibet/China.• Create an open Special Economic Zone (SEZ) and providing tax incentives to compete with Indian SEZ to make production competitive.
• Arrest decline of third country exports.
• Open SEZ for viable products such as carpets, garments and pashmina and initiate backward integration for raw materials and packing materials through backward integration.
• Introduce uniform packages in select territories as in North-east India, Sikkim, Uttaranchal, Jammu & Kashmir to promote new investments.
• Introduce special labour policy in select SEZ like Tea, Garments, Carpets.
• State should acquire land for SEZ and enter into joint ventures for developing and selling back to various SEZ.
• Allow significant incentives for corporatising agriculture to induce entrepreneurs/corporates, such as no limit on landholdings, special labour policies, no taxes, concessional interest rates for land acquisition or production infrastructure for limited time through government subsidies.
• Decvelop forestry:follow Finnish models of Sarnath for corporatising forests as long term contracts through tenders by involving co-operatives or private sector joint ventures.
• Massive promotion of dairy industry: follow the Amul model of Gujrat.

Binod Chaudhary,
president, CNI