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.
The point that should have been given the deserving consideration by the Government was: how to enable our exporters to compete in the world market by providing them with level playing field without which nothing can be helpful to our exporters, who are not only earning foreign exchange, but also creating and maintain a lot of employment and contributing to GDP.
I fail to understand as to how the Government led by an as enlightened and acknowledged economist like Dr. Manmohan Singh failed to promote the sectors, which bring in prosperity, employment and foreign exchange, besides making greater contribution to GDP? Nothing can explain this except that politics has overtaken economics.
This has led to frustration bordering depression among garment exporters and certainly Pranab Mukherji has not proved himself to be a Finance Minister, worthy of taking care of economy at the time of world economic crisis, which he himself acknowledged a number of times in the course of his Budget speech.
The views presented are author's personal views. Here 'I' refers to him.