1998- 99 (Contd.) Shri Pranab Mukherjee

279 The Budget [RAJYA SABHA] (General), 1998-99 280 ह ह ह ZF ह ह higher allocations by comparing between non-comparables and it has happened not in $P ^ one year alone. It has happened almost G ह C a^ for the last three consecutive years. ह ह ह What is the basic problem? The basic ह, ह, problem is this. We suggested that the % ह $P ^ public sector enterprises should raise their # , resources from the market or by generating ह ह H their internal resources. They have -not , ह been able to do that. I would not like to ह H eU ^W multiply the examples. Take the power e ह e sector, the coal sector, the communication Z sector and even the railways except in recent years when the Railway Finance G ह ह Corporation has been able to raise some ह ह, e ह ह P ह resources, have not been able to raise 24 घ ह Z ह the resources they were expected to U# ह ह ह raise. But when they fail to raise the ह resources, there is a shortfall in the a , overall Plan Outlay. ह The second point which I was dealing ह, with is about the depressed expenditure a ह figure and the inflated receipt figure. ह Take the case of defence expenditure. , G ह ह From 1995-96 onwards, there has been 6 , 1992 ह 10% to 14% step up in the defence expenditure every year. And you cannot \ह ह ह just expect that this step up in this budget is G 30 _ ह ह ह going to be adequate. Therefore, there # G comes the question of having a higher ह ह ह ह P , fiscal deficit and imbalance in our financial structure. Now, the Finance ह ह Minister, while presenting his Budget, came out with three very laudable ideas. ह, ह ह ह He wanted to have a simplified tax ] ह structure, a saral structure. He wanted to K# Hह ] have better compliance by giving Z ह 4 sammaan to the tax-payer. Thirdly, he also ह ह, ह wanted to give them some relief by Z# C providing samadhaan. Two other aspects ह ह ह have been dealt with. It it proper on the part of the Finance Minister to bring ह 4Z another voluntary disclosure scheme ह ह a with some other name—of course, I am , ^ ह, not going into the rationality of that aspect; ह, _ ह ह it has been dealt with. But where is the saralata in his tax structure? Mr. Finance THE BUDGET (GENERAL), 1998- Minister, when the finance Bill is discussed 99 (CONTD.) clause-by-clause, we will show how you have made he tax structure more complex. SHRI PRANAB MUKHERJEE (West I am giving you just two examples. Bengal): The point which I was trying to drive at is about the fallacy in projecting 281 The Budget [10 JUNE, 1998] (General), 1998-99 282 Before the changes were to be is exaggerated. It may be all right that it may introduced, there were nine customs not be to that extent. But sanction going to rates. You have increased it to 12 affect the inflow of capital; it is going to customs rates. Similarly, in the excise affect the import of technology, particularly duty also you have increased it. You have said the dual-use technology; it is going to affect in your Budget statement that would like to do your exports; it is going to affect many of the away with the large number of unnecessary projects which you are exposing for support reductions which are making the tax laws from multilateral agencies. This year it was complex. I agree with you. It should have expected you will have about three billion been done. I had suggested this in an article US dollars from the World Bank on before the Budget was presented, that the different projects. Since the events of Finance Minister may consider having only 11th and 13th of May, how many projects two types of concessions. The first is a have been deferred in the World Bank? It higher depreciation account—1 am talking of is just the beginning. I am giving you one the corporate sector—and then you have example. One of the private airlines of introduced some sort of investment India was to buy some aircraft, Boeing 737; allowance and these after do away with all some sort of contract was entered into. other deductions, which will help you to Boeing planned their exports depending simplify the tax structure. Perhaps, it may be on getting support from the Exim Bank of too radical. But what have you done? You USA to the extent of 200 million US have withdrawn a set of some concessions, dollars. Now they are renegotiating taking and again introduced some other sets of into account the impact of sanctions, about concessions and in the process the 10.2 billion US dollars are being provided for structure has become complex. insurance and financing overseas US companies which make investment The third point on which I would like to approved. These are the companies which comment and I would not like to take more make investment and they get insurance time of the House, is about the adverse coverage; they get financial support from impact of the sanctions. Yes, I know your this Company. Now, if they find that own assessment of the situation when you these are going to have an adverse impact on dismissed the whole thing in one sentence your inflow of capital. At some point of of your Budget speech. This is in the very time, you will have to address these first page itself where you say, "I am problems. Yes, you may require time. confident that this initial negative response There is no harm if you take time—two will be moderated as our position gets better months, three months, four months. But after understood and we will not have any that please come with a detailed assessment. significant impact- on our economic The other day, we were discussing development". about the debt problem. If you look at the debt problem, the basic fundamental which Mr. Finance Minister, you are entitled to you are talking of is no doubt strong. But have this view, but perhaps, it is not correct. it did not come out of accident; for that I am not concerned about 150 million US people had to work, people had to plan. In dollars which you are going to have directly 1991, our debt—GDP ratio—I am talking as aid from USA. If it is not available we of the external debt—as percentage of GDP can manage without that. But it has its was 30.4 per cent. It went a little high in 1992 wider ramifications. I am prepared to go with when it was 41 per cent. And thereafter you considering that one estimate according to the book circulated by you projecting that the total impact will be there has been a continuous downward about 21 billion US dollars 283 The Budget [RAJYA SABHA] (General), 1998-99 284 trend. It is given in your own document, Mr. cement industry or in the aluminium Finance Minister, which you have circulated industry would have been covered. Yes, to us. this is one of the basic strengths of our there is a Central public sector outlay of Rs. economy. I would like to know whether this 1,05,000 crores but the Budgetary support basic strength is going to last, is going to is only Rs. 42,000 crores. Internal continue. For two consecutive years you resources and extra-budgetary support are have negative growth in your exports; for nearly Rs. 63,000 crores which will not two consecutive years you have slow materialise and at the end of the year, we industrial growth and what is the will be faced with a situation where there assessment on which you have come to the will be a shortfall in plan outlay. I do not conclusion that you are going to have seven blame anybody. It has been the pattern per cent GDP growth, if there is no step- because to have a higher outlay we project it up in industrial development, if there is no and thereafter when the public sector step-up in export growth? If these trends are enterprises fail to mop up this level of not reversed, whatever be the balance resources, they ultimately end up position today, I am afraid, he BOP crisis compromising with he overall Plan is bound to emerge. expenditure. One warning signal you should take from I now come to the last point on which I the observations of Dr. Manmohan Singh will comment and thereafter I will which he elaborated and I would just like to conclude. Sir, the basic of the economy today with which we are confronted touch that point with three percentage despite strong fundamentals which we revenue deficit, with 6.5 per cent fiscal have, is serious fiscal distortions and deficit, the real interest rate is going to be internal debt. Every year it is going up. higher. And if real interest rate is going to Yes, you have decided to widen the tax be higher—already our exports are having base but still I do feel that there is adequate infrastructural input constraints—with a scope of expanding the direct tax net. Why higher rate of interest, with bitter am I talking of direct taxes? competitiveness in the international market, how are we going to compete This is non-inflationary.

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