| Budget Speech
Mr. Speaker,
1. I am greatly honoured to present the sixth successive budget of the
Government of the National Democratic Alliance (NDA), under the premiership of Shri Atal
Behari Vajpayee.
2. I wish to place on record high appreciation of my distinguished
predecessor, Shri Yashwant Sinha, who so ably steered the country’s finances in the
earlier budgetary exercises. That has made my task so much easier today.
II. THE CHALLENGE AND THE RESPONSE
3. At the core of our economic endeavour and management of the
country’s finances are the interests of our citizens; all this effort is for their
total well being. That is our central objective, towards which the NDA government has a
non-negotiable commitment. Through Budget 2003-2004, the Government, therefore, addresses
the following five objectives, as ‘Panch Priorities’, for our citizens and for
the economic security of our country, though these are not listed in any hierarchial order
of importance:
- poverty eradication; addressing the ‘life time concerns’ of our citizens,
covering health, housing, education and employment;
- infrastructure development;
- fiscal consolidation through tax reforms and progressive elimination of budgetary drags,
including reform of the additional excise duty, introduction of service tax, and
introduction of Value Added Tax (VAT) from April 1, 2003 at the State level.
- agriculture and related aspects including irrigation; and
- enhancing manufacturing sector efficiency, including promotion of exports and further
acceleration of the reform process.
4. Permit me to share the conceptual underpinning of these ‘panch
priorities’. Let us, to start with readily acknowledge that the essential
entrepreneurial character and the creative genius of our citizens is our greatest asset.
This energy has to be released. For that, and for converting the liability of want into
the asset of ability, eradication of poverty is crucial; that is the moral and economic
issue of our times. Too often it is observed that budgetary exercises float over the wide
mass of India, relating only to a few. This is not so here. And that is why a closely
interrelated concern is renewed progress on the front of agriculture; our nation’s
life blood. A second revolution, to follow the earlier Green Revolution is the vital need
of today.
5. But neither in agriculture, nor in industry, shall we be able to
attain our objective, if infrastructure, both physical and social, is not rapidly and
efficiently developed. For this, private and public interest must combine so as to
generate maximum social welfare. Upon these foundations, and through encouraging specific
manufacturing sectors, particularly activities where knowledge is industry, we will
enhance growth, improve incomes, generate employment and promote exports. For our growth
to be sustained, fiscal consolidation is the basis; it is the central pillar. Government
has to totally eliminate budgetary drags, and be rid of the self-laid traps; they retard
both the pace and the robustness of our growth. What is needed is a continuous and
self-reliant progression of accelerating, all round growth, with a wider distributive
spread of national wealth and greater spending power in the hands of all our citizens. We
have to recognise the need to address a reduction of not just our social but economic
inequalities, too. This cannot be postponed. That is why reforms are so critical. And, our
reform agenda must not be held hostage; either to yesterday’s debates, or to
subjective and selective interpretations of it. This is a collective need, for the
nation’s growth, which all of us have to address together.
6. Mr. Speaker, there is palpable impatience in the country for
progress and growth. The nation can not afford the luxury of prolonged periods of
reflection, or a leisurely implementation schedule. The world will otherwise pass us by.
Beyond deregulation, it is more and ever more de-bureaucratisation that is needed, as much
of systems as of the mind. Of course, institutions matter, correct design and application
of rules, too, but all in the service of our national objectives; not either as obtuse
abstractions or as partisan goals. The core need in the country is of releasing national
creativity. The Budget 2003-2004, of the NDA Government endeavours to do just that. This
is our economic and social compact.
III. THE BACKDROP
7. I want to now briefly share with Hon’ble Members the backdrop
in which we address our responsibilities.
Geo-politics
8. The circumstances in which we meet are defined by the current global
uncertainties; their vortex lies over the Gulf, and Iraq is at the very core of it, even
as the Israel-Palestine conflict smoulders. Vast naval armadas crowd the waters of the
North Arabian Sea, and land and air forces prepare for battle. Nearer, our neighbour
Afghanistan, torn by decades’ old violence, continues to struggle with post-Taliban
tremors. In North-East Asia, old animosities are flared to near criticality through
irresponsible external assistance. And, our immediate western neighbour, riven internally
by multiple fault lines, spews venomous terrorism from the cauldron of its compulsive
hostility for India.
Macroeconomic circumstances
9. Despite all this, and despite the present volatility in
international oil prices, alongside a continuing sluggishness in global recovery,
uncertain markets, a 9-month long military stand-off on our borders; the simultaneous
challenge of combating externally aided and abetted terrorism; and the worst drought that
we have faced in three decades; objectively, the country’s macroeconomic
circumstances have never been better for attaining our developmental objectives of
enhanced and sustainable growth, poverty eradication, employment generation, and improving
the quality of life.
Economic performance: 2002-03
10. Sir, the overall economic performance in 2002-03 has been reported
in detail in the Economic Survey. I do not wish to repeat all that except to highlight
that despite the agricultural GDP decline of an estimated 3.1 per cent, caused entirely by
a large decline in crop output, the country, registered a real growth of 4.4 per cent in
GDP, net of inflation. Growth rates of industry (6.1 per cent) and services (7.1 per cent)
accelerated very encouragingly, as did exports by a healthy 20.4 per cent.
11. From 1956 onward, continuously, we have endured serious foreign
exchange constraints. Not any longer. After a gap of 24 years, our current account turned
into a surplus in 2001-02, and continued to be in surplus during the first two quarters of
the current year. Our reserves’ build up during the last year has been the highest
ever in a single year, with reserves crossing $75.5 billion in the third week of February.
In early-February, the Government decided to prepay $3 billion of its external loans.
India is now an exporter of grain to 15 countries, and donor of hard currency aid to a
dozen, alongwith rupee aid to another dozen countries. The rupee, with foreign assets to
currency ratio of 124.8 per cent, is stable. Gross domestic savings, as a proportion of
GDP at market prices, have also improved and stand at around 24 per cent. In the course of
the last four years, our interest rates on Government securities, have rapidly gone down
from 12 to around 7 per cent, thus setting the stage for growth of investment.
The Tenth Five-year Plan
12. The National Development Council, in December 2002, approved the
Tenth Five Year Plan, with a bold and ambitious target of 8 per cent annual growth on the
average. One of the crucial aims of the Tenth Plan is to promote a balanced and equitable
regional development and to advance the necessary policy and administrative reforms at the
State level. The allocation for 2003-04 includes several additional initiatives such as
promoting infrastructure by leveraging public money through private sector partnership,
provision of 2 lakh hand-pumps in water-scarcity areas and schools, rejuvenation of 1 lakh
traditional water sources in villages, research and development (R&D) support in
pharmaceuticals, wind and solar energy, among others.
13. Permit me, Sir, to now address the ‘Panch Priorities’.
IV. ANTYODAYA AND LIFE-TIME CONCERNS
Antyodaya Anna Yojana
14. For eliminating poverty, it is only reforms that result in
sustained growth and high employment that are the durable solution. However, given our
comfortable food stock, there is both scope and a need for a direct attack, too.
15. Mr. Speaker, Sir, I am sure you agree that the disadvantaged must
always be the first charge on our exchequer. This is our belief, it is our creed; this is
also at the heart of ‘integral humanism’. Therefore, it has been decided, and I
want this to be the first announcement that is made, that the Antyodaya Anna Yojana will
be expanded 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. The
additional budgetary expenditure on this account will be Rs.507 crore.
16. Sir, may I, in humility, say that this does cover the first part of
my assurance: "Garib ke pet me dana,….".
17. Rural development, rural industries and artisans, and poverty
alleviation in urban areas are addressed severally through various schemes in different
ministries. A need has, therefore, been felt for sometime that all these schemes, of the
same genre, be rationalised. To do that, a Committee headed by the Deputy Chairman,
Planning Commission, is proposed. It will examine all schemes having a bearing on poverty
alleviation and rural development, and recommend their practical convergence.
Life-time concerns
18. The Prime Minister had on Independence Day, 2002, announced the
Government’s commitment to improving national well-being by addressing the
‘life-time concerns’ of our citizens, a noble and holistic objective.
Housing
19. Of these, I take housing first. It is a basic necessity. While
promoting the all important employment-generating activity of construction, it also
stimulates demand for core industries like steel and cement. To maintain its present
momentum of growth, it is proposed that interest deductible under income tax up to
Rs.1,50,000, for construction or purchase of a self-occupied house property, be continued.
In addition, it is proposed that income from housing projects for construction of
residential units, of prescribed specification, approved by the local authorities up to
March 31, 2005, will now be exempt from income tax. Thus, not only has the limitation with
regard to the year of sanction, earlier frozen at March 31, 2001, now been extended, but
the benefits of the scheme also made available irrespective of the year of completion. The
Finance Ministry is further examining what additional incentives can be given to basic
infrastructural developments that must accompany slum upgradation, sewerage system laying
and green-field housing projects.
Education
20. Education is the central vein of our ‘life-time
concerns’. Therefore, at the level of the citizen taxpayers, as a first step
education expenses up to Rs.12,000 per child for two children, will be made eligible for
rebate under Section 88 of the Income Tax Act.
21. India is a highly creative, knowledge-based society; but authorship
of books has never been sufficiently rewarded, certainly not monetarily. Therefore,
royalty income up to Rs.3 lakh per annum, received by authors of literary, artistic and
scientific books shall henceforth be fully exempt; as will be royalty received by
individuals from exploitation of patents. This is in addition to the other existing
exemption benefits.
22. I declare, Mr. Speaker, a possible, personal benefit here as an
author of some books, with variable but always modest royalty income. There, however, is
no conflict of interest, Sir, because this measure has not been announced with any
personal benefit in mind.
Games and sports
23. Games and sports are a necessity, as much for recreation as for
developing sound bodies and minds. They must be encouraged. But, for a nation of a billion
plus, sports facilities available to our young are woefully inadequate. Therefore,
development of sports infrastructure will now be supported through direct funding of
public-private joint initiatives. Guidelines in this regard will be issued shortly.
Health
24. With three principal objectives in mind: to contribute to enhanced
national health; to promote India as a global health destination; and to enable easier
access to health facilities to our disadvantaged citizens, a number of additional measures
are now proposed.
25. In order to encourage private hospitals to either establish new or
to expand existing medical facilities, it is proposed to extend the benefit of Section
10(23 G) of IT Act to such financial institutions as provide long-term capital to private
hospitals with 100 beds or more.
26. In view of the rapid strides made in R&D in medical equipment,
there is recognisable need to frequently upgrade and replace the existing equipment with
the more ‘state of the art’. It is therefore, proposed to increase the rate of
depreciation from the present 25 per cent to 40 per cent in respect of life saving medical
equipment.
27. To assist citizens with impaired vision, the basic customs and
excise duties on rough ophthalmic blanks shall be reduced from 25 to 5 per cent, and from
16 to 8 per cent, respectively. To help people give up their addiction to tobacco and its
products, excise duty on Nicotin Polacrilex gum shall be reduced from 16 to 8 per cent.
28. It is also proposed to reduce the customs duty on specified life
saving equipment from 25 per cent to 5 per cent, and also exempt them from CVD (additional
duty of customs). In respect of life saving equipment already exempt from CVD, it is
proposed to exempt them from excise duty as well, so as to encourage indigenous
manufacturers.
29. A large number of life saving drugs are either exempt from customs
duty or attract a nominal 5 per cent duty. It is proposed to extend the concessional duty
rate of 5 per cent to some more drugs. Life saving drugs currently attracting nil or 5 per
cent customs duty will also be exempt from excise duty. Basic customs duty on glucometers
and glucometer strips used by diabetics, will be reduced from 10 per cent to 5 per cent;
and they will be exempt from excise duty as well. Cyclosporine will be exempted from
excise duty. This reduction of excise duty to nil, wherever imports are exempt from CVD,
will certainly make our domestic industry more competitive, as also better enable them to
face the new intellectual property right regime from 2005.
Health insurance
30. For a large majority of our less advantaged citizens, easy access
to good health services is just not there. In order to correct this and offer health
protection, of some choice, the public sector general insurance companies have been
encouraged to design a community-based universal health insurance scheme during 2003-04.
Under this scheme, a premium equivalent to Re.1 per day (or Rs.365 per year) for an
individual, Rs.1.50 per day for a family of five, and Rs.2 per day for a family of seven,
will entitle eligibility to get reimbursement of medical expenses up to Rs.30,000 towards
hospitalisation, a cover for death due to accident for Rs.25,000, and compensation due to
loss of earning at the rate of Rs.50 per day up to a maximum of 15 days. To make the
scheme affordable to BPL families, the Government has decided to contribute Rs.100 per
year towards their annual premium. Full details will be publicized shortly.
31. I request Hon’ble Members to give this scheme the widest
possible coverage in their constituencies. The benefits Sir, are real.
32. In the first phase, at least an additional 50 lakh BPL families
will be covered during 2003-04.
Disabled and handicapped
33. The Government is committed to providing equal opportunities,
protection of rights, and all-round development of persons with disabilities. A number of
initiatives have already been taken in this regard.
34. Now, for income tax purposes, it is proposed that the physically
handicapped or persons with such dependents be entitled to a deduction for permanent
physical disability of Rs.50,000, and an enhanced deduction of Rs.75,000 in case of severe
disability.
35. I also propose to reduce the customs duty on hearing aids,
crutches, wheel chairs, walking frames, tricycles, braillers and artificial limbs to 5 per
cent without Special Additional Duty (SAD). They will be exempt from CVD, and the domestic
manufacturers will also be exempt from excise duty. I also propose to reduce the customs
duty on parts of hearing aids and wheel chairs to 5 per cent without CVD and SAD.
36. The Government will establish a college of rehabilitation sciences
at Gwalior, and a national institute for empowerment of persons with multiple disabilities
at Chennai.
The salaried
37. A constant refrain of the salaried has been limited standard
deduction for income tax purposes. It is asserted that as a group they consistently
demonstrate the best tax compliance. I agree, they do. It is, therefore, proposed that the
standard deduction for such employees be raised to 40 per cent of salary, or Rs.30,000,
whichever is less, for salary income up to Rs.5 lakh; and allow a deduction of Rs.20,000
for salary income above Rs.5 lakh. It is also proposed that relief be provided to
employees opting for voluntary retirement scheme (VRS), by exempting VRS payments up to
Rs.5 lakh, even when taken in instalments.
38. The Government will restore the Leave Travel Concession (LTC)
facility to its employees. Mr. Speaker, Sir, permit me to hope that the consequential
additional outgo from the exchequer on this account, will at least benefit some in our
tourism industry.
Senior citizens and pensioners
39. India will shortly become home to the second largest number of
elderly persons in the world. The population of our elderly, at present estimated at 76
million, is expected to increase to 100 million in 2013. The interests of the pensioners
and senior citizens are, therefore, a particular responsibility of the NDA Government.
40. To enable them to live their life of retirement in dignity, the tax
rebate to senior citizens is proposed to be increased to Rs.20,000. As a result, their
income up to Rs.1.53 lakh will henceforth become fully exempt from income tax. In the case
of senior citizens on pension, the effective exemption limit may hereafter be actually
higher and become Rs.1.83 lakh, because of standard deduction. They can get further relief
by taking advantage of the tax rebate available under Section 88. In addition, to reduce
their cost of compliance, but of much greater importance to them – to reduce
bureaucratic hassles – I propose to accept self-declarations filed by our senior
citizens, in regard to no deduction of tax at source from interest income, income from
units, and such other sources.
Insurance pension scheme
41. Nevertheless, in the context of the declining rates of interest, I
do take on board the difficulties that are often voiced and could be faced by our senior
citizens and others. In order to provide relief to them, the Life Insurance Corporation of
India (LIC) will launch a special pension policy, guaranteeing an annual return of 9 per
cent, in the form of a monthly pension scheme.
42. This scheme will be called: Varishtha Pension Bima Yojana, through
which a pensioner, or any citizen above 55 years of age, could on payment of a lump-sum
amount get benefits calculated at 9 per cent per annum. For this scheme, and with pensions
in mind, any citizen above the age of 55 years of age will qualify, and will get a monthly
return in the form of a pension for life. Upon demise, the initial amount deposited will
be returned to the spouse/nominee under the policy. The minimum and maximum monthly
pensions proposed are Rs.250 and Rs.2,000 per month. This monthly pension will start from
the month following the payment of the lump-sum amount by the citizen. The difference
between the actual yield earned by the LIC, on the funds invested under the scheme, and
the assured return of 9 per cent, will be reimbursed to the LIC annually, by the
Government. Other details of this scheme will be announced shortly by the LIC.
Ex-servicemen: our veterans
43. For ex-servicemen, whose welfare is so close to my heart, I propose
to grant income tax exemption to corporations set up under a Central or State Act for
their benefit. It is a matter of great personal satisfaction to me, that of the Prime
Minister’s scheme for establishing 227 ex-servicemen medical (XSM) facilities in the
country, the first will be inaugurated in April this year. The Ministry of Finance fully
supports this scheme.
Restructured pension scheme
44. My predecessor in office had, in 2001, announced a road map for a
restructured pension scheme for new Central Government employees, and a scheme for the
general public. This scheme is now ready. It will apply only to new entrants to Government
service, except to the armed forces, and upon finalisation, offer a basket of pension
choices. It will also be available, on a voluntary basis, to all employers for their
employees, as well as to the self-employed.
45. This new pension system, when introduced, will be based on defined
contribution, shared equally in the case of Government employees between the Government
and the employees. There will, of course, be no contribution from the Government in
respect of individuals who are not Government employees. The new pension scheme will be
portable, allowing transfer of the benefits in case of change of employment, and will go
into ‘individual pension accounts’ with Pension Funds. The Ministry of Finance
will oversee and supervise the Pension Funds through a new and independent Pension Fund
Regulatory and Development Authority.
|
