The Hindu : National : Economists outline road map for budget

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Sunday, Jun 06, 2004

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National

Economists outline road map for budget

By Our Special Correspondent

NEW DELHI, JUNE 5. In keeping with the thrust areas of the United Progressive Alliance Government, leading economists today suggested to the Union Finance Minister, P. Chidambaram, a number of initiatives aimed at encouraging the agriculture sector. They also suggested review of the Kelkar Committee recommendations on direct taxes which call for alterations in the income tax slabs and rates and widening of the service tax net to raise more resources.

Participating in the pre-budget meeting organised by Mr. Chidambaram, economists called for increasing public investment in agriculture with particular emphasis on creation of non-farm employment opportunities and for providing fiscal incentives to the corporate sector for investing in rural industries. Suggestions were also made to rejuvenate the village economy by promoting water harvesting, water conservation and watershed management and allocating public resources to create enabling infrastructure for export-intensive agro-processing industries. Increase in rural credit, providing a dedicated thrust to skill-based rural education and exploring options for taxing the richer segments of the agriculture population were some of the other suggestions made at the meeting.

It was also suggested that the Finance Minister outline a medium-term road map for rationalising subsidies while some economists called for withdrawing subsidy to fertilizer companies. Increasing user charges for public services such as electricity was another prescription for the Minister. Along with the suggestion for revising the Kelkar committee report, there were suggestions for minimising exemptions in income and corporate tax, rationalisation of small savings rates and simplifying the excise duty structure. Shifting to a Value Added Tax (VAT) system and replacing sales tax at the State level and shifting to an ad valorem system of excise duties and moving away from specific levies were also suggested.

A direct attack on poverty through cash transfers and issue of food stamps or food vouchers rather than non-targeted subsidies was another suggestion.

On the fiscal front, Mr. Chidambaram was asked to improve the efficiency of public expenditure and restructure the Expenditure Reforms Commission while deferring the less essential expenditure commitments of the CMP. He was also told to carry forward the pension reforms and make possession and disclosure of PAN a mandatory requirement for all major transactions.

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