BUDGET 1998-99 - INADEQUATE POLICY INITIATIVES

In an attempt to carry along all sections of society the budget has me asures to improve the farmers' lot, has not changed the direct tax,str ucture so as not to hurt the middle class, and has given protection to industry whilst increasing expenditure on infrastructure. This accomm odative stance has not allowed the government to rein in the fiscal de ficit and the budgetary targets may not be met. New measures are neede d to strengthen the institutional weaknesses of the financial system s uch as raising liability limits on shareholders, giving tax sops for N PAs taken off the books of banks, and limiting, entry into banking. Wi th indirect taxes still a dominant source of revenue, the exemption li mit for personal taxes needs to be reduced and all savings exempted fr om such taxation so that the introduction of a full-fledged VAT is not regressive. With the emphasis of the agricultural reforms on the term s of trade being misplaced, total factor productivity improvements via research and investments in agricultural infrastructure are called fo r.