Budget 1997 is expected to pro-poor, inflationary and not likely to be growth oriented, said Prof. J.D Agarwal , Director, Inian Institute of Finance in a seminar on 'Budget 1997 : Needs and Expectation' on 25th February 1997. Accroding to Prof .Agarwal the Govt. would probably focus on social sector and would announce a number of welfare schemes. Fiscal deficit may not be contained to 5 per cent of GDP.The inflation may be double digited by June'1997. The govt. might announce incentives to attract foreign direct investment in infrastructue and to revive the capital market.Additional resources are likely to be generated by widening the tax base.

The Finance Minister will have to balance a variety of conflicting objective with heavy constraints on financial resources. It would include, the heavy fiscal deficit, the debt service ratio, lower export growth rate, mounting oil pool deficit, the heavy financial burden due to pay Commission recommendations, heavy debt burden, weak tax administration, existence of massive corruption, black money and capital flight.

Most of the seven broad objective outlined by the Finance Minister in his maiden budget speech on 22nd July, 1996 have not been attained in the last eight month. The Union budget 97 should focus on objectives of growth social justice, containing inflation to single digit, controlling corruption and black money. Additional resources are required to provide for increase in the absolute amount of explicit and implicit subsidies, pay hikes, oil pool deficit, infrastructure needs like power and roads, additional allocations programmes, primary education, and public health. While the demand for available scarce resources is massive there is a pressure for containing fiscal deficit well below 5% of GDP, reduction of tax rates, raising exemption limits, reduction in excise duties adn measures to boost stock market and capital market, said Pof. Agarwal. Disinvas a recipe for raising additional resource has not clicked.

There may be an increase in the minimum exemption limit to Rs. 54,000 instead of justifiably expected limit of Rs. 50,000 in the budget to give relief to the salaried class. The maximum limit of investment under section 80L may be also be increased from the current level of Rs. 13000 to Rs. 16000. Similarly maximum amount of investment allowed for tax purposes under section 88 may be increased from Rs. 60,000 to Rs. 70000, as larger saving are reuired in the economy both for investment and boosting the capital market.

There is a strong justification for with drawl of minimum Alternative Tax (MAT), introducedm in July 1996 , as its introduction to raise additional revenue was a breach of faith on the part of Government to take advantage of tax incentives offered from time to time , and made promises to invstors, were asked to pay minimum alternative tax (MAT) . However , if for revenue considerations MAT is not with drawn , the anomalies such as calculation of depreciation as per Companies Act insted of Income Tax Act, which exit in the working of MAT should be removed. This will provide some relie to corporation, commented Prof. Agarwal.

There might be some rductions in excise duties and customs duties to meet the international reqirements.

To generate additional revenue, as attempt might be made to widen the tax base by taxing services such as transprot services, railway services, domestic air traval of revising international travel tax from like power and roads. There may even be a possibity that he house owners and car owners may be asked to minimum tax for owning these assets. Widening the tax base as a recipe may under the present circumstances might prove to be counter productive as widening the tax base would only widen corruption and loosen the tax compliance.

To contain fiscal deficit below 5 persent of GDP the government should improve tax collection and exercise more vigorously control over public expenditure, although containing fiscal deficit for a developing economy like ours cannot and should not be the main objective of budget. Controlling public expenditure is not easy but the govenment should try to increase the productive efficiency of each rupee spent.

The budget is likely to be concerned about the capital market.The stok market has shown some improvement in last two weeks. RBI has already brought CRR and SLR at reasonable level to provide enough liquidity in the eonomy. The budget might allow investment of a part of provident fund or pension funds in the securities or bonds. The capital market should be left to itself without interference or support from the government so as to follow the rules of market driven economic System.

The Finance Minister might announce setting up regulattory agencies for foreign direct investment in infrastructure particulary in power and roads. It might increase the budgetory provision towards the authorised share capital of Infrstructure Captial Development Finance Company (IDFC) . The financial institution like LIC and some of the leading commercial banks including RBI might be asked to contribute towards the share capital market fail to meet the capital market expectation, according to Prof. Agarwal

Prof. Agarwal also said to compete globally industry is rightly asking for a level playing field for domestic industry. It is also rightly complaining about high interset rates and existence of laws like FERA. The government should bring about necessary amendments in various economic legislation in the wake of changing economic secnario. India is a dynamic economy and various legislation need to be changed acccordingly to suit the needs of the economy.