UNION BUDGET FOR 2000-2001 
The Hon'ble Finance Minister, Shri Yashwant Sinha presented the union budget for 2000-2001 in the Parliament on February 29 which proposed to mop up additional revenue of Rs.6904 crores. He said the government is targeting a growth rate of 7-8 per cent with a fiscal deficit of 5.1 per cent of GDP against the estimated figure of 5.6% for the year 1999-2000 (though the budgeted figure for this year was only 4 per cent). The rise to the fiscal deficit during 1999-2000, he said, was largely on account of the unanticipated expenditure on national defence, elections and the super cyclone in Orissa. The residual impact of the Fifth Pay Commission coupled with the need for special fiscal assistance to the states resulted in raising net borrowing requirement to over rupees one lakh crore. The huge shortfall in the receipts for disinvestment (only Rs.2600 crore against the target of Rs.10,000 crore) as well as revenues has aggravated the situation the finance minister pointed out. 
 

His chief proposals in the union budget included increase in fertilizer prices, bank privatisation, slashing of subsidies and shifting to a single value added tax regime and fresh range of direct taxes. 

The table below indicates the estimates of receipts and expenditure envisaged in the budget :- 

S.No.          ITEM                              1999-2000                   1999-2000                   2000-2001 

                                                          (BE)                                (RE)                               (BE)

1. Receipts

a) Revenue Receipts              1,82,840                      1,79,504                 2,03,673 

i) Tax Revenue                        1,32,365                      1,26,469                 1,46,209 

ii) Non Tax Revenue                    50,475                         53,035                   57,464 

b) Capital Receipts                 1,01,042                      1,24,234                 1,34,814 

i) Recoveries of loans                   11,087                         12,736                   13,539 

ii) Other Receipts                         10,000                          2,600                   10,000 

iii) Borrowings and other liabilities     79,955                     1,08,898                 1,12,275 

Total (a + b)                                   2,83,882                     3,03,738                 3,38,487 

2. Expenditure

a) Revenue                             2,36,987                     2,53,036                  2,81,098 

i) Interest                                   88,000                        91,425                 1,01,266 

ii) Others                                  1,48,987                      1,61,611                1,79,832 

b) Capital                                    46,895                         50,702                5,73,389 

Total Expenditure                     2,83,882                      3,03,738                3,38,487 

3. Revenue Deficit (2a-1a)           54,147                         73,532                  77,425 

% of GDP                                          2.7                              3.8                      3.6 

4. Budget Deficit (2-1) - - - 

5. Fiscal Deficit {(4+1(b)(iii)}      79,955                        1,08898                1,11,275 

% of GDP                                         4.0                               5.6                        5.1 

6. Primary Deficit {5-2(a)(i)}      - 8,045                          17,473                   10,009 

% of GDP                                       - 0.4                               0.9                        0.5 

The break up of the estimated receipts and expenditure both under the revenue and capital heads in terms of percentage is given under : 

RECEIPTS                                    EXPENDITURE 

A. Tax Receipts          51           Revenue Expenditure            78

Excise Duties             18         Interest Payments                 26 

Customs Duties          14         Defence                               15 

Corporate Tax           10         Subsidies                                6 

Income Tax                8       States Share of taxes and duties 14 

Other Taxes               1   Non-Plan assistance to States & UTs 4 

                                    Other non-plan expenditure            13 

B. Non-Tax Receipts 49       Capital Expenditure                     22 

Borrowings and other  28       Central Plan                            13 
liabilities

Non-Debt Capital         6        States UTs Plan assistance        9 
Receipts

Non-Tax Revenue       15 

Total                      100                                                   100

Highlights of the Budget : 

Small Scale Industry

i) For improved credit flow to SSI units: 

Requirement for providing collateral security for loans of Rs.1 lakh increased to Rs. 5 lakh. 

Composite loan limits of SIDBI and banks to be increased from Rs.5 lakh to Rs.10 lakh. 

Public sector banks asked to open SSI branches in every district and also to obtain ISO certification. SSI cluster within districts to be served by at least one specialised SSI bank branch. 

Provision of Rs.100 crore for credit guarantee scheme of Centre to be implemented through SIDBI to cover loans upto Rs.10 lakhs from the banking sector. Guaranteed loans to be securitised and tradeable in the secondary debt market. 

ii) The limit of equity support under National Equity Fund Scheme raised from Rs.15 lakh to Rs.25 lakh. 

iii) Operation of Refinance Technology Development Modernisation Fund Scheme (RTDMF) of SIDBI extended by another 3 years. 

iv) KVIC to introduce common brand name for its products and set up a professionally managed marketing company for domestic and export marketing. 

Large Industry

SEBI to be a nodal agency for registration and regulation of domestic and overseas venture capital funds. A major liberaliation of the tax treatment for venture capital funds also to be taken up. 

Ceiling under the automatic route for acquisition of companies abroad by Indian corporates increased from US $ 15m to US$ 50m through approval by the Committee on Overseas Investment. 

Disinvestment/privatisation/public sector restructuring

Main elements of government's policy towards the public sector reiterated as under : 

Restructure and revive potentially viable PSUs 

Close down PSUs that cannot be revived 

Bring down government equity in all non-strategic PSUs to 26% or lower, if necessary. 

Fully protect the interests of workers. 

Government will put in place mechanisms to raise resources from the market against the security of such PSUs which are sick and are not capable of being revived. 

Infrastructure 

Augmentation of resources for the National Highways Development Project announced by the Prime Minister (total cost of which amounted to Rs.54,000 crore). 

Plan outlay for central PSUs in the power sector increased from Rs.7,626 crore to Rs.9,194 crore. Increased budgetary support has also been provided for the Tehri Hydro and the Nathpa Jakhari Hydro projects. 

Additional central plan assistance of Rs.1000 crore to state and UT governments for assistance to state utilities. 

The North East Region

Priority to be given for development of infrastructure in the North Eastern States for their speedy economic development. 

More facilities for vocational education being provided wherein it is proposed to establish 50 more industrial Training Institutes and 446 computer information centres in the North East in the next 2 years. 

To encourage agricultural and horticultural development in NE through new schemes for minor irrigation and horticulture. 

Social & Rural sector :

New scheme of `Pradhan Mantri Gramudyog Yojana' to provide basic amenities in rural areas. 

`Sarva Sheksha Abhyan' scheme to achieve a goal of universalising primary education. 

New `Janshree Bima Yojana' to provide social protection to the poor. 

Banks :

Accepting the recommendations of the Narasimham Committee on Banking Sector Reforms the government has decided to reduce its share in nationalised banks to 33% 

It has also decided to consider recapitalisation of the weak banks to achieve the prescribed capital adequacy norms, provided a viable restructuring programme acceptable to the government as the owner and the RBI as the regulator is made available by the concerned banks. 

Four more Debt Recovery Appellate Tribunals at Mumbai and one more DRT each at Calcutta, Delhi and Chennai to be set up to facilitate expeditious adjudication and recovery of dues of banks and financial institutions. 

Some of the proposals under direct and indirect taxes are summarised below: 

Direct Taxes

No change in the rate structure. 

Retained 10% surcharge on Corporate and Income Tax. Surcharge on income tax hiked from 10 to 15 per cent for all persons with taxable income in excess of Rs.1.50 lakh. 

Farmhouses to be brought under tax net. 

Streamlining of minimum alternate tax (MAT) and paying the rate lower at 7.5% on book profits compared with 10.5 per cent at present. 

Tax rebate to senior citizens raised from Rs.10,000 to Rs.15,000 

Additional rebate of Rs.5,000 for women tax payers from their tax liability. This would be subject to a ceiling of Rs.15,000 if they also happen to be senior citizens. 

To encourage the growth of knowledge based industries and encourage investment in them a new regime of venture capital funds proposed. 

Tax holidays to new units set up in industrially backward states and districts extended by 2 years, similar benefit to new SSI units also. 

Rate of tax on dividends distributed by domestic companies increased from 10% to 20% 

Rate of tax on income distributed by debt oriented mutual funds and UTI increased from 10% to 20%. However, income distributed under US-64 and other open ended equity oriented schemes of UTI etc. exempt from this tax, at present. 

2% interest tax on banks and FIs abolished. 

Export income to be taxed from 2000-2001. 20% withdrawal of income tax exemptions from export income from Financial Year 2000-2001. Phase out of these concessions over a period of five years. No tax holidays for new units set up in free trade zones (FTZs) and 100 percent export oriented zones (EOUs). 

Indirect Taxes 

(a) Excise :

Convergence of three ad-valorem rates of basic excise duty viz. 8%, 16% and 24% to a single rate of 16% Central Value Added Tax (CENVAT). Certain items however exempted from excise duty such as medical items and those used by common man. These include tooth powder, sanitary towels, napkins for babies, cutlery and knives, clocks and watches, kerosene, LPG, laundary soap, cotton yarn etc. 

W.e.f. 01.07.2000 all statutory records in excise to be dispensed with. Excise department will now rely upon the manufacturers' records. 

W.e.f. 01.04.2000 excise assessees allowed to pay the excise duties in fortnightly instalments instead of on day-today basis. 

W.e.f. 01.07.2000 existing section 4 of Central Excise Act to be replaced. in place of `normal price' concept, new section based on `transaction value' for assessment will be used.

(b) Customs :

The effective peak rate of customs has been retained above 40 percent despite 5 percent cut in the top ad valorem rate from 40 per cent to 35 per cent. Some important items on which custom duties have been raised are the following 

i) Duties raised :

a) Natural rubber 25% to 35% 

b) Gamma ferric oxide 5% to 15% 

c) CVD on glass fibre thread and glass filter cloth 5% to 16% 

d) Kerosene on parallel marketing 

e) Agricultural goods                 Basic

(other than cereals)                 customs 

f) Horticulture and floricultural    duty 

products                                 raised 

g) Dairy products                     to 35% 

h) Processed foods 

i) Marine products 

ii) Duties reduced :

a) Crude oil from 20% to 15% 

b) Platinum and diamonds from 40% to 15% 

c) Logging machines from 25% to 5% 

d) Pseudoionoml (material for producing Vitamin A) from 35% to 25% 

e) Dietary soya fibre from 40% to 15% 

f) Ferronickle from 15% to 5% 

g) Automatic data processing machine
(computers) from 20% to 15% 

h) Petroleum products from 30% to 25%