'An industry-friendly Budget'

Print edition : July 30, 2004


Interview with Y.K. Modi, president, FICCI.

Y.K. Modi, president of the Federation of Indian Chambers of Commerce and Industry (FICCI), thinks that industry does not need funds from the government, and that all it needs is a "congenial atmosphere". He says that the hype surrounding the Budget is unnecessary as "it was only along expected lines". He, however, thinks it is a "good Budget in the right direction". Excerpts from an interview Modi gave Purnima S. Tripathi:

How would you describe the Budget? Was it along expected lines?

The Budget can be described as industry-friendly, in the sense that it has imposed no restrictions on us. The best thing about the Budget is that it has removed any apprehensions about a setback to the reforms process. There were doubts in some quarters, because of the role of the Left parties in the government, that there could be a setback to the reforms process, but such apprehensions have now been set to rest.

Was it like the "dream Budget", which Chidambaram presented in the past?

Actually, we have started expecting too much from the Budget, as if it is the be all and end all of what a government can do. We forget that the Budget is just one tool in the hands of the government for fiscal management. The real issues bothering us all such as delivery of government services to the needy, health, education, infrastructure, pragmatic labour laws all these fall outside the purview of the Budget. As for this being a dream Budget, I would say the policies were already there, it is a continuation of those policies.

What did industry expect from the Finance Minister?

We would have liked more rationalisation of direct taxes, simplification, re-adjustment of slabs. Besides, the 2 per cent cess on all taxes for education could have been avoided. Not that one does not want to pay for a worthy cause like this, but a cess has to have a direct linkage, in the sense that a cess on petrol funds the building of roads and so on. Here there is no linkage and there is no guarantee the money will actually go into education. More than the money, the real problem here is non-delivery of already existing services. Look at government schools, there are no teachers, no buildings, no other facilities. He could have done without this cess. The money could have come from elsewhere, such as from tobacco or whisky or some such luxury items. We are going to demand that this be withdrawn.

What, in your opinion, would have been the compulsion for him to impose the cess?

Actually, it is for the first time any government is really serious about the manifesto and the Common Minimum Programme. It is a part of that, plus compulsions of coalition politics. But we need to wait because the real Chidambaram Budget will be in March next. We will wait for that.

What would be your expectation from such a Budget?

A complete overhaul of direct taxes: increase the tax base, bring it to Rs.15 crores from the present Rs.3 crores, tax the rural rich, simplify the tax structure, redefine slabs, make compliance more effective, have policies that attract new investment, emphasise infrastructure. He has made a good beginning in the right direction.

But the Left parties have expressed their displeasure over increasing the foreign direct investment (FDI) limit in the telecommunications, civil aviation and insurance sectors. Is the industry worried that the government could succumb to pressure from the Left and retract?

The Left is crying wolf. If they are so opposed to foreign investment then why are they seeking it in West Bengal? In fact, they are making noises only for public consumption. They too realise that the process that has been set in motion cannot be reversed.

Does industry have any specific complaints about the Budget?

Yes, the 2 per cent cess. It must be withdrawn. And the rate of turnover tax is too high for comfort. The Finance Minister should revisit these two areas.

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