Ladies and Gentlemen, Professor Nagar, his excellencies, distinguished guests, faculty and students of Indian Institute of Finance, it is a matter of privilege for me to share my views on one of the most hot economic subjects of today. The Union budget has been presented yesterday in Lok Sabha (Parliament of India) by the honorable Finance Minister of India. This public lecture on Analysis of Union Budget is second in the series, launched last year by Indian Institute of Finance, in the public interest. I was privileged to deliver the first lecture on 4th March last year in the same auditorium. This time again, I have been asked, rather even forced by the faculty and the students of the institute to deliver this public lecture.

I: Introduction:
Ever since the budget has been presented yesterday, there has been discussion on budget in electronic media- on TV channels, All India Radio and Newspapers giving quick reaction on the budget. The discussion has given the event a lot of publicity and its due importance. The people deserve to know the opinions of politicians, industry, trade associations, experts and even the common man on the union budget. Most newspapers today are full of reports including the text of Finance Minister's speech and the quick reactions.

Most discussions particularly reactions are brief, quick and either appreciating or critical of the budget. Largely reactions have been mixed. Most reactions due to the space, time and affiliations have been one sided either appreciating or criticizing the budget proposals.

The objective of this public lecture is to give a detailed analysis of the budget highlighting both the positive and negative aspects as well as implications of the budget proposals in an objective and unbiased manner. The exercise is academic in nature, free from the biases of any affiliation with any political, business, or other sector of the economy. The prime interest is public and the nation while analyzing the budget. Any appreciation or criticism is coincidental or incidental and not an appreciation or criticism of either the government, or the political party(s) in power. This public lecture is to be viewed in this light. We believe that people deserve to know in details the implications of budget, which affects their lives. I must reiterate once again, that our analysis is totally apolitical, to keep in mind the spirit of this public lecture series. Probably that was one reason that the faculty and students of the Institute insisted that I must accept to deliver this lecture to avoid any overtones or undertones of any natural biases due to affiliations.

Discussion on budget with articles, opinions, forecasts etc, begin almost one month before the scheduled date of 28th February, in the media and even private parties every year. However, this year the situation is slightly different due to World Cup (cricket match) being played diverting the attention of people simultaneously. Extra hype created by media on budget, ongoing talk of reforms without achieving much in substance, has also reduced the interest of people in the budget, to some extent. People feel, year after year finance minister makes promises little of which are achieved to improve the quality of life of people.

II: Objectives of Budgetary Policy:
The budget requires identifying its objectives and priorities clearly. These objectives and priorities, may differ, from year to year, depending upon a number of factors - the stage of economic development, the future vision, last year' performance, the needs and aspirations of the people and the economy and the ideology and constraints of the political party in power, besides many others. Ever since India became independent the objectives outlined by finance ministers in their budget speeches and their proposals, differed widely. However, the objectives of any budgetary policy in a developing country, recognized and accepted internationally, broadly remain the same such as: Economic Growth; Inflation; Fiscal Management; Employment; reducing inequalities of incomes and wealth and eradication of poverty. The specific situations prevailing in the economy are both a resource and constraint, and require necessary changes in identifying the objectives and priorities of the budget.

The successive budgets must create equality of opportunity than equality of outcome. A budget should be both a good economics and good politics. It is not a pure economic instrument. Nor it is an accountant's income statement giving details of incomes and expenditures of the Government. It is not even a plan document of the economy to replace the five-year plan or become a yearly rolling plan of the five-year plan. A budget cannot be a solution to all the problems encountered by an economy in one year. But it can certainly be a sincere attempt to provide policy framework, a direction to the economy and speak the mind of the government as to how it intends to give that direction. It is not an instrument to distribute largess or penalize people or any sector(s) of the economy. It is a financial policy document of government of the country. It requires financial expertise, which can use financial engineering, to seek creative solutions with limited resources, to provide for innumerous problems, needs and meet the aspirations of the people, the nation and the agenda of the political party(s) in power. It is an instrument to carry out necessary corrections based on the review, analysis of the past both distant as well as current. Its base is political economy and instrument is the finance and the beneficiaries are all the stakeholders: people, groups, sectors, states and the nation in the global context, and the time frame is both the current year as well as future. The actor is the Finance Minister as a member of the cabinet and the government.

My objective in the next one-hour, would primarily be to cover areas, which have not so far appeared in the media or being presented otherwise. I will make an attempt to fill up the gap, which I feel exist in analysis, interpretation and implications of this year's budget.

Let us come to the budget analysis now. In my opinion, the presentation of the budget ceremony in the parliament yesterday has not witnessed the acclamation matching the concessions, which have been distributed by the finance minister to almost all sectors of the economy without exception, during his more than two hour speech spreading over 31 pages. I think it deserved more claps both during the presentation as well as possibly afterwards. First and quick reaction gives a feel good factor. At a latter stage, with deeper analysis, the cheers may fade away, claps may reduce and criticism might even begin and by the time, the year is over the people forget the budget, its implications, economic situations and wait for another ceremony.

III: Economic Outlook:
The world economy is passing through economic slowdown, the problem of unemployment, slower growth rate, and fear of terrorism, and fear of war in the Middle East. India is a large country with a population of 100 crores (one billion) plus. It is three times the size of population of United States. Its geographical area is one-third the size of United States. It is a country of numbers almost in every walk of life. India is one of the largest markets in the world. It has suffered the worst financial crisis in 1991. It has successfully handled its worst financial crisis after launching the policy of economic reforms, privatization and globalization after a long spell of excessive controls and regulations. The economic fundamentals of Indian Economy are strong. Its foreign exchange reserves have reached strong position with 74 billion dollars; inflation rate during the whole of last years remained largely stagnant at 3 percent, Indian Industry that has had a bad spell has grown at 5.3 percent. The over all growth rate of GDP at 4.4 percent, has been fairly appreciable in the background of unprecedented drought conditions affecting as many 20 states and agriculture. Fiscal deficit has gone up to 5.9 percent and consolidated fiscal deficit has touched double-digit figure. On the external sector there has been Balance of Payments surplus for the first time after several decades. It was during pre independence that India used to have Balance of Payments surplus with its share of 4 percent in international trade. The growth rate of exports at 20 percent has also been encouraging. Investments in the economy did not match savings rate of 24 percent despite reduction and deregulation of interest rates. People preferred to save than to spend despite lowering the interest rates on PPF and small savings and fixed deposits of banks. New investments in the form of Initial Public offering have been deplorable. Although, the rate of literacy has gone up from 52 percent to 62 percent in the recent past due to governmental efforts but the rate of illiteracy is still very high at 38 percent. More than 65 percent people are still engaged in agriculture and live in countryside. A large mass of population constituting 26 percent people, live below poverty line even after 56 years of independence and despite the slogans and resolve of politicians including finance ministers in their budget speeches to eradicate poverty. The unemployment has been on the rise. Ever since economic reforms, privatization and globalization has been adopted wide concessions have been granted to rich and also to business and industry so as to provide them level playing field, improve technology and grow at a faster rate, but with no substantial positive results. The industry that has been growing at 8 to 9 percent suddenly suffered badly in growth parameters in 2001-02 and could grow at the rate of 5.3 percent in 2002-03 (up to the end of third quarter). There has been substantial improvement in the foreign exchange reserves ever since 1991 from US $ 2 billion to US $ 74 billion in last week February 2003. The fiscal deficit despite governmental efforts to contain it below 5 percent has reported to be 5.9 percent and is proposed to be at 5.6 percent. The consolidated fiscal deficit for the year 2002-03 is expected to be over 10 percent. With this trend, the proposed fiscal deficit of 5.6 percent, it is likely to continue over 10 percent. The present level of Fiscal deficit is a matter of concern to almost all the economists. This requires special attention. However, the growth in exports and balance of payments position has been satisfactory in 2002-03. For the first time in more than 30 years India has got balance of payments surplus. It is only in pre independent era that India used to have balance of payments surplus. The balance of payments surplus, high rate of savings of 24 percent and budget capital expenditure on infrastructure should have fueled growth in the economy. But it did not happen. Newer investments mobilized from the public by Indian Industry through initial public offering continue to be at an extremely low level during the year and the off take of credit from banks flushed with funds even despite the lower interest costs (prime lending rates being reduced) has been very low. The stock market continued to be sluggish despite governments concern and strong economic fundamentals. FDI and FII investment in the economy have not been received at the level, India deserves.

There has been significant improvement in Infrastructure in the last few years yet a lot is yet to be done. Roads particularly rural roads, railways, ports, airports, power, communication and infrastructure of social sector require government attention. Non-availability of electricity to industry, agriculture and even households for several hours of a day has become ritual. Similarly, despite achievements, elementary education, employment, health, sanitation, drinking water, social security of workers in unorganized sectors and old, up-liftment of women and people below poverty line requires utmost attention of the government. Besides attacking the past ills, present needs, future aspirations budget requires to take care of vision of India 2020. India is a young country with average age of 35 years while the west and the rest world including east is aging. The young in India has capacity to contribute more productively for a longer span than their counterparts elsewhere. The future belongs to India if handled properly. The Prime Minister's desire and as envisaged in tenth five-year plan to attain a growth rate of eight percent during 10th five-year plan period. With current year's growth rate of 4.4 percent, achievement of these targets of growth rate seem to be too tall. Has this year's budget given the economic and political constraints and compulsions, taken care of some or most of these aspects adequately, is a very big question? Will the budget boost growth, and take the country forward at faster rate through these budget proposals?

At the outset, I must say that this year's budget may be hailed as an excellent and very good budget at micro level and by some sectors of the economy like industry, rich, upper middle class particularly salaried class and urban population of the economy. It may also be appreciated for its focus on micro aspects and sectoral bias. It may be growth oriented, employment generating, raising the quality of life of a section of people, discourage savings and boost expenditure. But this year's budget is neither good economics nor good politics. It has failed to take care of, adequately, the current needs, future aspirations or correct the past ills of Indian economy.

Let me now come to analysis of budget proposals in details. It is clear from the budget speech that the Finance Minister has diagnosed the problems of Indian economy correctly. He has rightly recognized and identified panch priorities. However, good diagnosis is half cure if treated properly. Hindu mythology believes that there are panch tatv in a human body. The number panch is auspicious in Hindu mythology. The formation of panchayats in Indian villages has its historical base from the panch word. But while prescribing the cure his focus shifted from the macro level solutions to the problems to micro level solutions. He adopted the role of a giver or provider rather than that of a facilitator. Instead of making the system self propelling without the government support, the system is made to become dependent on the government. Lollypops are being distributed to make the people (sectors) in the system to work. The government should have tried to free itself from such distribution of lollypops, so that the government could perform more important role of governance. I am also unable to understand as to how can there be priorities without hierarchical order. To quote the Finance Minister "these are not listed in any hierarchical order of importance." Probably what he wanted was to list panch lakshya (five objectives), and not panch priorities.

These five (panch) priorities as outlined in the budget are:
i. Poverty eradication; addressing the 'life time concerns' of our citizens, covering health, housing education and employment.
ii. Infrastructure development;
iii. Fiscal consolidation through tax reforms and progressive elimination of budgetary drags, including reform of additional excise duty, introduction of service tax, and introduction of Value added tax (VAT) from April 1, 2003 at the state level.
iv. Agriculture and related aspects including irrigation; and
v. Enhancing manufacturing sector efficiency, including promotion of exports and further acceleration of the reform process.

IV Antyodaya and Life-time Concerns:
I welcome and have my appreciation for his concern for the disadvantaged and announcing extending the Antyodaya Anna Yojana from April 1, 2003 to cover an additional 50-lakh families raising the total coverage to more than a quarter of all BPL families during the year 2003-04 and making an additional budgetary expenditure of Rs.507 crores on this account. Indeed it will be a great relief to this one-quarter of BPL families. It is very short-term solution. It will also provide relief to FCI to reduce its burden of excessive stocks and the resultant carrying costs. But the solution is not sustainable in the long run due to mounting burden of food subsidy. And how long will the government continue to bear this cost without creating a system where these BPL families become self independent earning a living, hold their head high as proud Indians, rather than being dependent on Government's mehar (charity). Moreover, how long will it take to cover all the BPL families and at what cost so that there is no deprivation and no disadvantaged. More than 26 percent people i.e. about 26 crore people, as per the estimates live below poverty line. At the current rate with accelerated pace with two pronged strategy where the proportion of BPL families go down and such schemes have net additions, it would take at least next twenty five years to cover all the BPL families. Can India of today afford that? If so, at what social cost?

His announcement that various schemes of rural development, rural industries and artisans and poverty alleviation in urban areas be rationalized, is indeed welcome feature of the budget. Such convergence is an urgent need of the hour. But there should have been some time frame mentioned in the budget for the committee to be set up and make its recommendations so that the process of considering practical convergence were have been expedited and to effect the process of rural development, rural industries and artisans, and poverty alleviation in urban areas.

His budget proposals regarding lifetime concerns are also to be appreciated. Indeed housing, education, games and sports, health, health insurance, disabled and handicapped, the salaried, senior citizens and pensioners, insurance pension schemes, health insurance, ex-servicemen, restructured pension schemes are laudable.

Most of these proposals based on incentives based system are going to benefit those who can afford them. For instance, the deduction of interest up to Rs.150,000 for construction or purchase of a self -occupied house property from income under income tax and extension of the year of sanction, earlier frozen at March 31, 2001, can be used by those can afford to spend about 15 lakh and above in house property. And they should have income to claim this much of deduction from their income. Lower middle class income group whose total income is less than Rs.150000 may not be able to avail of this benefit. More than 2/3rd of India of India falls in this category, whose interests have not been adequately taken care of.

Finance Minister has rightly identified the parental responsibility by granting rebate on educational expenses under section 88 of income tax up to Rs.12000 per child for two children and also exemption of royalty income of Rs.300000 to authors. But it would only benefit a very small group of people primarily upper middle class and urban population and in a small way. Tax rebate for the educational expenses would be available subject to the ceiling, which has been otherwise enjoyed by this class of people. However, one may have larger income by Rs.24000 (incase of two children) for spending. How the real disadvantaged have the benefit of education through this rebate whose total gross income is not even Rs.24000. There has been no increase in allocation for the elementary education for the year 2003-04. It has been maintained at Rs.4900 crores (last years budget figure) despite the fact that government is interested to raise the literacy level and need for larger funds both to improve the quality and quantity of elementary education in the country. A public private joint initiative could have also been proposed.

He has announced some bold initiatives to enhance the national health. The insurance scheme, combined with exemption under Section 10(23G) to financial institutions financing private hospitals, reduction in excise, and custom duties and raising the depreciation rates would go a long way to increase the medical facilities. These proposals are again have urban bias except the health insurance. How many private hospitals would be ready to set up hospitals in 100 beds in towns or villages where more than 65 percent people live. There is an urgent need to improve the existing medical/health infrastructure both in terms of quality and quantitative. It appears to me that adequate attention to that has not been given in this budget.

It is difficult to generate estimates in terms of increase in housing, education; health when the development of these three are open ended and is incentive based and tax centric. The above budget proposals would also add to the burden of exchequer in terms of loss of revenue. Even after 56 years of India's independence we are still struggling to seek solution of the problem of providing for the most basic necessities- food, shelter and clothing.

V. Physical Infrastructure:
His proposals about investment in physical infrastructure - roads, national rail vikas yojana, airports, seaports, convention centers rural roads, power and drinking water, deserve appreciation. An investment of more than Rs.60, 000 crores in physical infrastructure would generate demand for goods of basic industries, generate employment, and boost growth in the economy. The investment in infrastructure is left to the innovative funding mechanism i.e. to leverage public money through private sector partnership, wherever possible (release of funds only when linked to specific well defined milestones in completion of projects; in physical terms, and sharing of risks. But for leverage of public money no funds have been allocated in the budget. To what extent private sector partnership would be effective is subject to big "if". However, the allocation for rural roads, which is to be mobilized through cess on diesel, is too low given the requirements of rural roads. The problem of drinking water is handled inadequately. The additional budgetary allocation works to be Rs 2 per person provided it is spent well and all the money allocated is spent. The solution is also factory/ urban centric. In urban areas Jal Boards provide water. While in villages and towns, hand pumps or wells are the major sources of water. The water level is going down continuously. The problem of drinking water is likely to be more acute in the years to come. Even as of now, in some parts of the country, women carry drinking water from rivers or wells sometimes from one to two kilometers on their head. Merely granting depreciation at 100 percent, exempting import of capital goods from excise and customs duties, or exempting pipes from excise duties may not be sufficient to take care of need for safe drinking water.

VI: Fiscal Consolidation:
The Finance Minster's prescription of fiscal consolidation through cash management, external debt prepayment, buy back of government loans, and the debt swap scheme to take care of debt position of the state governments, are innovative and welcome features of the budget. These measures would facilitate the process of fiscal consolidation. However, Cash management can only help maintaining smooth liquidity of various ministries rather than control wasteful expenditure. What is needed today is to control excessive wasteful expenditure of the government by adopting some of the modern techniques of management such as: Review of expenditures periodically, introduction of budgetary control mechanism, implementation of zero base budgeting, introduction of performance budgeting etc could have helped the government to keep a tap on the expenditure management of the government. Of course, on resource mobilization, the finance minister has taken some steps including extending the scheme of service tax on some more items and raising the service tax rates. Expected fiscal deficit of 5.6 percent is in any case too high. Given the past practice, it is likely to go up at least by half percent or affect adversely the capital expenditures, which are necessary to build the capacity and efficiency of the economy. The consolidated fiscal deficit may even touch double digit for the year 2003-04. Most economists are concerned about the high level of fiscal deficit and feel that in the long run it may not be sustainable. However, if the fiscal deficit is within limits and is likely to improve the efficiency and capacity of the economy, it may not be bad. On resource mobilization front, the finance minister should have focused on non-tax revenue incomes. On the contrary, non-tax revenue incomes are proposed to decline by about one percent in the proposed budget. Similarly, the finance minister should have used some creative solutions to mobilize tax revenues as well, such as unearthing black money from the system. Currently, black money to the tune of Rs.300, 000 crores is being generated every year. Even 10 percent of this money means a tax realization of Rs.30, 000 crores. It could have been very important for fiscal consolidation. There are so many other untapped areas of generating both tax and non-tax revenues which could have been used by him without inflicting any burden on the people of the country, maintaining tax equity, expediency and consistency.

VII. Agriculture:
Finance Minister has very rightly recognized the need to respond to second generation issues such as land degradation and water logging, diversification, resonance with market forces, and a swift adoption of sunrise technologies. Indeed India has the largest irrigated, arable landmass in the world with a gross arable land, second to United States. But Indian agriculture suffers from low productivity, poor technology, insufficient fertilizer, poor quality of seed and being handled traditionally by farmers with no or low level of literacy, and land fragmentation. His proposal to introduce a new central sector scheme providing a sum of Rs.50 crores, on Hi-tech Horticulture and precision farming is indeed appreciable. But the amount provided for the scheme seems to be too inadequate to achieve worthwhile results given the size of India's arable area. However, raising the price of fertilizer by Rs.12 for urea, and Rs. 10 for DAP and MOP per 50 Kg bag is not justifiable particularly in the current year when there has been wide spread draught and despite the pressing need for reducing the mounting fertilizer subsidy.

His proposals regarding sugar, plantations particularly announcing price stabilization fund of Rs.500 crores for the benefit of tea, coffee and natural rubber growers, abolishing the excise duty of Re 1 per Kg. And replacing it with cess of Re 1 per Kg are welcome features of the budget. His reducing the basic customs duty on specified veternity drugs etc is also good for the animal husbandry and veterinary. Some of the steps taken in the past for credit availability to the agriculture and rural economy though satisfactory yet require closer monitoring. Banks in general are only trying to fulfill the minimum limits set for the purpose rather than supporting the credit availability as per the real requirements, despite the need and excessive liquidity with the banks and lower level or NPAs in agriculture and rural economy. Success of self-help group bank linkage program propagated by NABARD is heartening and creates equal opportunity for people. Drip irrigation technology would help in a big way to control the problem of water logging and also conserving the water resources. But unless states cooperate this may not give desired results. States may have their own financial problems in implementing this technology. The finance minister has rightly recognized the need for river interlinking and proposed to set up the task force and provided an adequate outlay to support his task force. The flood-drought-flood syndrome requires urgent attention and implementation of the scheme. A capital outlay for river interlinking should have been provided if the scheme is agreeable in principle as desired by the prime minister. His scheme desert pasturage development is also appreciable particularly with marginal burden on states.

VIII. Industry:
The Finance Minister has granted wide ranging concessions to industry to consolidate the gains and build on the robust industrial growth demonstrated in the last three quarters. His proposals on textiles, long term capital gains tax, stock markets, research and development, pharmaceuticals, information technology, bio-technology and tourism, gems and jewellery, strengthening ECGC, small scale industries, disinvestments and promoting India through India Development initiative are good and deserve appreciation. His proposal to reduce customs duty on imported gold to Rs.100 per 10 grams from the present level of Rs.250 per 10 grams would provide much needed relief to almost all the families in the country. Gold is an essential item particularly during weddings and other ceremonies and an important social security measure for women and families. It would also provide Alternative Avenue of investment when the rates of interest on bank deposits and small savings including PF and PPF are continuously falling.

But his proposal on dividend distribution tax is resulting into inequity and tax inconsistency. Taxing dividend distribution tantamount to double taxation. First the government is taxing a company when it earns incomes in the form of corporate income tax and secondly when it is distributing this income to its shareholders in the form of dividends tax. This anomaly was first introduced by Mr. P. Chitambaram when he was finance minister. Mr. Yashwant Sinha later on corrected it last year with effect from 2002-03. It is being proposed once again by the finance minister this year. Incomes in the hands of a new assesses are always a new income and hence cannot be double taxation as some of the lobbyists have claimed. Exempting dividend incomes in the hands of individuals introduces inequity and tax inconsistency. A person earning Rs. 2 lakh is taxed. Similarly a person earning more than Rs. 15000 by way of interest is also taxed but a person earning Rs.2 crores by way of dividend is exempt from paying any tax. There are some individuals whose dividend incomes may be running in hundreds of crores but would be exempt from tax on these dividend incomes. In the past it has been observed that most of the companies even decided not to distribute dividend to avoid paying dividend distribution tax. That resulted in subdued capital market. Small investors not getting dividends shied away from the market as they primarily invest either for short-term capital gains or dividend incomes. It has also been observed that about 80 percent companies did not pay dividend when dividends were taxable in the hands of companies In most part of the world, dividend income in the hands of individuals is taxed. His proposal of taxing dividend distribution on companies belies the theory of finance dealing with dividends. Nobel laureates Franco Modigiliani and Merton H. Miller model on dividend and market value of the firm, taught all over the world, recognizes dividend incomes are taxable in the hands of shareholders. According to one of the reports published in Times of India (6 March 2003, p 17) the promoters of 38 blue chips of Nifty index (2001-02) will save around Rs.932 crores this year (assuming all are in 30 percent tax bracket and the dividend payout ratio is maintained). The Ambanis stand to gain Rs.91.3 crores, Munjals of Hero group Rs.53 crores, Narayana Murthy 11.3 crores, Azim Premji Rs.5.9 crores, Rahul Bajaj Rs.12.4 crores, the sons of late Parminder Singh of Ranbaxy laboratories Rs. 11.1 crores. As most of the companies are cash rich they might declare dividends this year.

IX. Other Reforms:
The Finance Minister's proposals on banking are welcome, particularly, to raise the FDI to at least 74 percent to facilitate the setting up of subsidiaries by foreign banks as well as inviting investment in private banks would invite investment, generate employment, meet the conditions of WTO agreement, may bring new technology and improve the quality of service.

As regards interest rate proposals, there can be no doubt that the administered interest rates on PPF and other small-scale savings need to be adjusted in line with the market rates. This will also facilitate to reduce the interest burden of the government. The share of interest burden mounting to 48 percent of its current income is really very high. Accordingly, it was very much correct to reduce the interest on PPF and small savings schemes. But the interest rates on PPF and small savings should have been reduced only on additional investments made with effect from the date such interest rate cuts are announced and not on all the accumulated investments. People have saved in the past in the expectation that they would get return on investments as per the rate prevailing when the investment in PPF and small savings is made. Those who saved planning their retirement for retirement days to earn a given a level of income, cutting down their current consumption pattern in the past for several years, should not have been affected on those savings. Those who save in PPF and small savings belong to middle income group, ordinarily no social security except their past savings. Moreover, these schemes have never given even the remotest idea that they would be subject to flexible interest rate structure. Such schemes at the time announcement should clearly mention as in case of bank deposits- fixed or savings that interest would be payable as prevailing from time to time. The rules, conditions, of schemes should be honored by all in totality be it government or people. Promises should as far as possible be kept.

The additional steps announced by him to ease the restrictions on capital account mobility would help Indian companies to have global presence. His announcements on external aid, providing relief to certain bilateral partners, debt relief package for the heavily indebted poor countries owing overdue payments to India and providing grants or project assistance to developing countries in Africa, South Asia and other parts of the developing world is very appreciable and would strengthen and build good international relations.

The cost of reform and reorganization of the ministry of finance is quite high as an additional sum of Rs.1700 crores have been provided for the purpose.

X. Tax Reforms, Revised Estimates and Budget Estimates:
The finance minister in his budget proposals on State-level Value Added Tax, Additional Excise Duty (AED) in lieu of sales tax, and central sales tax has shown serious concern to the finances of the states. His proposals to compensate state governments for introducing State-level value added tax (VAT), may motivate to shift to VAT from 1st April 2003 as financial loss of revenue would no longer be a reason to postpone shifting to VAT. It may facilitate globalizing the domestic trade tax system along other 120 countries. However, there are apprehensions, if the states for political or pressure from the local dealers or traders may be able to introduce from 1st April 2003 on the pretext that they are not ready for it as yet. The success of VAT system would depend only when it uniformly introduced by all the states. Election in some of the states around the corner, many of the state governments may try to postpone the introduction of VAT system. His proposal to compensate the states for loss of revenue due to reduction of CST at 2 percent on inter-state sales between registered dealers, during 2003-04, is also commendable. However, this compensation would be applicable only if states shift to VAT system.

Direct Taxes: The finance minister has announced much needed administrative reforms, simplified TDS provisions, and removed surcharge for individuals and companies. He has also rightly given relief to salaried class by announcing raising the standard deduction and also raising the deduction available under section 80L by Rs.3000. However, raising the minimum exemption limit instead of raising the standard deduction might have got much more admiration from individual tax payers, reduced the burden of Income Tax Department so that they could concentrate on high valued tax payers. The administrative reforms announced by him would provide a lot of relief from harassment and the payment of unofficial fee.

Indirect Taxes: The budget proposals on indirect taxes concerning excise and also customs duties involving rationalization, restructuring, and trade facilitation measures are commendable. These proposals are in tune with WTO agreements and needs of India's changing economy. These proposals would help provide Indian Industry level playing field both in India and globally. These changes would also help build Indian Industry's competitiveness. Many of the commodities might become cheaper while a few of them might be costlier. The incidence of tax increases would be passed on the consumers immediately. But benefit of tax reductions except in case of few commodities like cars may take some time or may never be passed on to consumers. Industry might pocket such benefits. It is of utmost necessity that such benefits are fully passed on to consumers to boost demand and motivate people to spend so that it may result in industrial growth. Higher turnover with lower profit margin is always more profitable than lower turnover with more profit margin.

Revised Estimates: The decrease in the expenditure of Rs.6296 crores as compared to budget estimates for the last year indicate that most of the ministries have not been able to undertake the expenditures, which they originally asked for. This is despite the fact, as finance minister mentioned, that an additional expenditure of Rs.24022 crores, on interest payments, on drought relief, food subsidy and the Delhi Metro Rail project had to be incurred. All expenditures incurred either on different sectors or by ministries concerned should be value based. One important question, which arises, is whether the ministries have been able to achieve the work targets with smaller expenditures. If so then the lower expenditures are justified and ministries need to be complimented. However, if some of the projects of strategic nature and importance, have not been undertaken by the ministries then it certainly require review both by the ministries as well as ministry of finance to seek justifications so as to take corrective action in the future. Wherever there are large variances, these variances need to be looked at with greater rigor. Ordinarily, ministries ask for more funds then they require. That practice needs to be curbed so that a realistic picture is presented in the budget.

Some of the ministries could not spend the allocated funds either as per the last year budgt estimates or even revised budget estimates.

In some of the cases the variances are so glaring that one is unable to understand as to why such variances have occurred. Is it because of procedural delays, lack of projects, lack of initiative taken by the heads of departments, or any other reason?

Similarly, there has been a shortfall of Rs.8788 crores in the net tax revenues of the central government. While there has been an overachievement of the targets in case of non tax revenues by Rs. 619 crores. Disinvestments receipts have also been lower by Rs. 8640 crores at Rs.3360 crores during the year 2002-03. There does not seem to be a justification for the shortfall in the tax revenues of Rs.8788 crores when the industry has grown at 5.3 percent, service sector has grown too, there is balance of payment surplus, exports have grown at 20 percent, and savings rate has been at 24 percent. Most companies have reported large profits in their biyearly results. Fall in the growth of agriculture, being non-taxed sector, cannot have effect on shortfall in the net tax revenues. Were the budget estimates for 2002-03 too high or the tax department so inefficient and people responsible to pay tax so corrupt? It is appreciable that there has been an overachievement of non tax revenue targets. As far as disinvestments receipts are concerned, it may not be a matter of too much concern, as ever since a drive to this effect has been launched, it has never met these targets. Moreover, the political samikaran is such that it has been too high a target. The progress despite it falling into a controversy at the stage when the tempo was built up, has been satisfactory.

Budget Estimates:
Expenditures:
The total expenditure is estimated to be Rs.438,795 crores during the year 2003-04 is higher by Rs.3855 crores as compared to last years budget and Rs,11028 crores as compared to revised estimates. Of which Rs.120,974 crores is for plan and Rs.317821 crores is for non-plan. He has pronounced that more than Rs. 60000 crores would be spent on various schemes during the year. (See table 2). It is despite the fact that there has been an increase in non-plan expenditure by Rs.24,022 crores.i.e. for interest payments (Rs.7560 crores), subsidies (Rs.7162 crores), and defence (Rs.9300 crores). Where are these funds provided for in the budgetary allocations is not clear from the budget documents. There are large variances in terms of allocations to different ministries both in comparison to last year's budget estimates as well as revised estimates. (table 1). In case of some of the ministries the allocations have been raised exorbitantly while in case of some of other ministries allocations in the current year's budget have been tremendously reduced.

Revenue:
Total revenue receipts of the center are estimated to be Rs.253,935 crores up by Rs. 8830 as compared to budget estimates 2002-03 and Rs16,999 as compared to revised estimates 2002-03. There is no change in the proportion in which revenues would accrue to the government. (table 3). Except for non-tax revenues where the proportion has gone by one percent, which is being financed through borrowings and other liabilities. Disinvestments of Rs.3000 crores has resulted in the loss of future non-tax revenue incomes of the central government. The finance minister has done little to raise revenues through alternative sources except about Rs 3000 crores through service tax by raising the service tax rate and including 10 more services in the tax net, through service tax.

When a country becomes developed the share of non-tax revenues goes up. Similarly, the share of direct taxes also goes up as compared to indirect taxes. But this year's budget does not give any such indications at all.

XI. Conclusion:
This year's budget is neither a good economics nor good politics. The finance minister has taken up a role of provider rather than that of a facilitator. The budget should have taken care of more adequately more than 70 crores people living in the villages and slums of cities, more than 26 crores people living below poverty line, and more than 38 crores illiterates. Each one of them has one vote to cast and elect like their counterparts who belong to other advantage category. The budget should have raised more revenues through non-tax sources and also through schemes of curbing and unearthing black money. The budget should have provided financial details as to how the schemes announced by him are to be funded. His pronouncements involving funds of over Rs.70,000 crores do not match with figures of outlays in the budget documents. The budget should have focused on rigorous expenditure control management to effect fiscal consolidation to contain fiscal deficit below 5 percent.