NEW DELHI: Indian finance minister Manmohan Singh will present the budgetary proposals for 199394 on February 28. The occasion will not necessarily mean a Onetime exercise to raise and allocate resources. In fact, the so-called budgetary exercises in India have become a joke. The bulk of the financial resources are mobilized by the government through executive orders weeks and months ahead of the budget leaving very little for the budget presentation day to the Indian parliament.
Prior to the February 28 budget, India mopped up as much as Rs 10,000 crore by rising prices of petroleum products, coal and food grains distributed through the public distribution system. The Prices of petroleum products were enhanced in September while the prices of food grains were raised in January; the government last week hiked the coal prices. The so-called budget later this week will involve excise duty increases to net a small amount of the order of Rs 1000 crore.
In these circumstances the budgetary exercise will be a public relations affair for the government, the finance minister will announce a few reliefs here and there and will make a concerted effort to reduce burdens on the industry and to strengthen capital markets. In the wake of the massive financial scandal the capital markets in India have been shattered.
The government finds it difficult to raise finances for the public sector. Even private sector companies are feeling the pinch of the financial scandals in as much as they find it hard to raise money from investors.
The minister’s effort will be to restore the confidence of the investing public in the share and financial markets. This is intended to send a message to foreign companies to invest in India.
Much will be said about the so-called liberalization of the economy butin practice the Indian government is in no position now to annoy the leftist parties because the Narasimha Rao government now seeks support from the leftist groups after the alienation of B J,P. from the Congress(I).
‘Thus the Indian finance minister will have to do a lot of tightrope walking between appeasing leftists on the one hand and making efforts to strengthen the capital markets and private business on the other hand.
It is also anticipated in financial circles that the minister will take further steps to make rupee convertible to the extent of 709 from the present 60%, He will stop short of making five rupee 100% convertible into dollars in foreign trade.
Thus the companies dealing in foreign trade will still have to deposit about 20% of their dollar earnings with the Indian government rather than be free to spend as they liked. The recent weakening of the rupee vis-à-vis the dollar was due to the rumors of full rupee convertibility.
Article extracted from this publication >> February 26, 1993
