The big mandate that the Indian public had given to Dr.
Manmohan Singh led Government stands seriously undermined with a single stroke
of Budget Proposals announced on the floor of Indian Parliament on 6th
July. The disappointment was so spontaneous that hardly had Finance Minister
finished reading his Budget speech that the Opposition Members of Parliament
got up to protest against the Budget Proposal. So immediate and strong was
their reaction that a history was created when the House had to be adjourned immediately
after the presentation of the Budget for the next day. The loss of goodwill
generated by the mandate seemed to evaporate in thin air.
To my mind, the Finance Minister, despite of decades of
parliamentary experience, failed to read the minds of the people and was
probably guided by the political considerations that far outweighed the serious
economic concern that the global economic recession with major economies in a
state of acknowledged depression should have brought about. He has preferred to
let go the fiscal deficit shoot up to 6.8% of GDP for what was essentially a
social Budget.
Nearer home, I would like to point out that the Indian
apparel exporters feel seriously let down. They had built up high hopes, which
were not unjustified at all; in fact, the long list of expectations and appeals
made by the apparel exporters was indeed the minimum most what should have been
done by the Government. This was more so when the trade bodies like Apparel
Export Promotion Council and Garment Exporters Association have repeatedly been
asking for. A recent presentation made by AEPC to the Finance Minister himself,
was eloquent and substantive enough to make any Finance Minister sit up and
think that here is a case, which calls for urgent support from the Government.
In fact, the detailed presentation listed out, with valid
justification, a number of recommendations, which included realistic duty
drawback rates, re-introduction of benefit of Section 80 HHC of IT Act,
exemption of Fringe Benefit Tax, income tax relief on R&D, Market Linked
Focus Product Scheme, rationalization of Excise duty, availability of export
credit, interest-free loans for investment in machinery with zero duty import
of capital goods, exemption from State levies, moratorium of loans for two
years, prime lending rate for T&C industry, exemption of Customs duty on
industrial garment machinery, allocation of enhancement of MDA etc.
Now, each of the concessions that the apparel exporters have
been asking for were extremely well-based. Most of the concessions that they
are asking for are what their counterparts in the competing economies are
already getting, without sometime even asking for. Take the case of our
neighbours like Pakistan, where garment exporters are entitled to 6% towards R&D
subsidy. China has been stepping up their fiscal support to the garment
exports, very frequently, on the first available indication of their garment
exports showing decline; notwithstanding that China continues to be the largest
garment exporter in the world.
Compare these with what our apparel exporters have been
endowed with in the Budget proposals. What has been bestowed by the Government
to the 'garment export sector' is much more limited that what has been doled
out to the industry and trade otherwise. For example, in case the garment
exporters would get the benefit of discontinuation of Fringe Benefit Tax, it is
not because the Government intended it for the garment export sector or the
export sector.
One benefit which should be acknowledged is the increased
provision of Rs.124 crore for Market Development Assistance (MDA). While the
Government, right when Kamal Nath was the Commerce Minister, has been
committing time and again that the Government would not like the taxes to be
exported, which had given hope that Service Tax would be withdrawn. Year after
year, the exporters have been expecting repeal of Service tax. The Budget
proposal honours that commitment only by waiving of the Service tax for
transport of goods through road and Commission paid to foreign agents. All
other legitimate demands of garment exporters' stand ignored.
