Putting Growth at Stake

FINANCE minister Chidambaram's second central budget exposes how firm a grip over public policies industry and business, the rich peasantry and the middle classes, constituting between themselves some 20 per cent of the population at best, have acquired. The focus of the budget is quite unabashedly the capital market. Virtually every one of the pre-budget pleas of the market players has found favour with the finance minister. There are the measures which directly concern the capital market such as permission for buy-back of shares by companies, the unified limit of 60 per cent for inter-corporate investment and loans, one-time tax exemption on capital gains for stock brokers who corporatise their operations, exemption of all dividend income from direct tax, reduction of capital gains tax on NRI investment from 20 to 10 per cent on par with FIIs, increase in the limit on FII portfolio investment in a company from 24 to 30 per cent, increase from 5 to 20 per cent in respect of venture capital investments in new ventures and the modification of the minimum alternative tax to exempt profits from exports and introduce a system of tax credit which can be carried forward for five years. But these apart, the drastic reduction of direct tax rates effectively by as much as one-third in personal taxation and one-fourth in company taxation, the five-year tax holiday for infrastructure projects, the liberalisation of rules for investment of incremental provident fund collections and the decision to go ahead with disinvestment of PSU shares as per the recommendations of the Disinvestment Commission have all been served up with an eye to stock market sentiment. Without doubt the capital market is being treated as the engine of industrial and economic growth.