BOMBAY, 12 January 2004 — The Indian budget is usually presented on Feb. 28 but there was a surprise for the Indian corporate world when Finance Minister Jaswant Singh announced a slew of sops last week.
Labeling it as a “mini-budget,” it brought immense cheer.
The “mini-budget” was presented mainly as a prelude to the forthcoming elections. As per law, once the election dates have been announced, the government cannot announce any new sops or policy changes. So before announcing the date, this “mini-budget” is a means to garner more votes into the vote bank.
If one looks at the sops, it becomes quite evident that Jaswant Singh had only one agenda — to win votes. In an election year what else could one expect? Political sense drives economic pragmatism. When collecting votes and when one has to show the achievements made while in rule, naturally a booming economy, a booming stock market, a very growth-oriented industrial scenario is very important.
Though the “mini-budget” is mainly a political gimmick, no one is complaining. Infact all have welcomed this concept of a mini-budget.
Jaswant Singh has tried to keep everyone happy, the sops have something for everyone — the common salaried man, the older retired generation, those aspiring to buy a house, industries like power, IT, infrastructure, pharma, aviation, consumer durables, all have been bought into the gambit.
India’s huge salaried class was very happy with Singh as he exempted salary income up to Rs.1.5 lakh per annum from filing income tax returns. This means that they will have to just pay the tax deducted at source. Also, Singh has tried to make the process simpler by allowing filing of paperless income-tax returns by the introduction of direct filing through Internet using digital signatures for salaried taxpayers, professionals like doctors, accountants, etc.
For the retired, which is the next largest vote bank after the salaried lot, Singh has taken out the pensioners from the one-by-six scheme, thereby exempting those with no taxable income from filing returns. This means that pensioners without taxable income need not file returns thus reducing paper work.
Housing loans interest rates have been reduced to bring them in line with the prevailing market rates. More choice has been given for the employers in case of home loans, they can take the loans from employers without additional tax burden.
Singh has also tried to bring the resident Indian at par with an FII or NRI. Any Indian citizen can now walk into a bank, buy dollars up to $25,000 a year and remit it abroad. The money could be remitted anywhere in the world and can be used for whatever he wants, no questions will be asked!
This is the first time a resident need not specify the underlying purpose of the foreign exchange transaction. This is the first step taken toward capital account convertibility. At present, the rupee is fully convertible only on the current account, which primarily relates to international trade transactions.
The IT industry was one happy lot. Excise duty on computers reduced from 16 percent to 8 percent. The 4 percent special additional duty was also abolished. With this, prices of computers are expected to fall by 8 to 12 percent. Computer sales are expected to jump by 40 percent.
The telecom sector, specifically, the cell phone industry has also got a big boost. Customs duty on cellular phones reduced from 10 percent to 5 percent. Also customs duty on specified raw materials and inputs used to manufacture electric components and optical fibers/cables has been reduced from 5-15 percent to 0-5 percent.
There have also been a slew of sops for baggage. Duty fee has been removed on 6 items (namely VCD/VCR, washing machines, personal computers, laptop computers, refrigerators of capacity up to 300 liters and cooking range) under transfer of residence.