The budget must be a statement that is more then simply a balancing of the arithmetic of revenue and expenditure. It should be an instrument for sustainable growth.

This budget is disappointing because it neither encourages confidence that the government has brought its fiscal difficulties under control nor does it have the vision for overcoming infrastructural bottlenecks, so essential for generating a growth of seven per cent and more. What was required was a large reduction in public expenditure sufficient to reduce interest rates and to stimulate private investment while protecting public investment in social sector spending.

Insufficient emphasis has been laid on disinvestment proceeds with an interest burden of Rs 1,00,000 crore. The risk of running into a debt trap is high if substantially more proceeds than stated by the Finance Minister are not accumulated to retire debt.

Acceleration of growth in our economy will generate a massive demand for infrastructure services. These services are all non-tradables and as such the challenge facing our economy will be to make this happen by expanding domestic support in each of the infrastructure sectors; further, since growth will in future occur in a more open trading environment, with strong pressures to improve competitiveness, the quality of infrastructure services should have to improve significantly.

This budget does not focus on those critical issues required to stimulate private sector investment in infrastructure. The Budget statements on infrastructure do not adequately show how, for instance, the state electricity boards (SEBs) will be restructured and refinanced. It does not provide a strong enough indicator on whether the state electricity boards will be able to generate resources required to improve their operational efficiencies and thereby, reduce the transmission and distribution (T&D) losses.

In the oil sector, the challenge for the government will have to be to provide the consumer with access to petroleum products at the lowest possible price and the highest possible service. Furthermore, the consumer is looking for more choice and for more real-time information on available choices. What the budget has done is merely reduce customs duties on crude oil and petroleum products, thereby providing protection to the domestic refiners, with no guarantee that the consumer will receive products from a wide range of suppliers. The decision to reduce customs duty on crude oil can be justified from the perspective of domestic investors that are committed to investing in manufacturing assets or in improving the efficiency of existing assets.

The decision cannot be justified on the grounds of encouraging new greenfield oil refining capacity, however. This is because there is a surplus of refining capacity in the world today and prima facie imported petroleum products can be delivered to the consumer at a considerably lower cost than the price charged by domestic refineries.

The budget should have focussed on enhancing the use of environmentally benign energy sources. In particular, the budget should have granted infrastructure status to import of liquefied natural gas (LNG) and pipeline gas, so that gas could increasingly substitute diesel and petrol.

He should have also redirected the current subsidies provided to rural inhabitants for purchasing photovoltaic systems from the government to reducing interest rates on the loans available to them for purchase of such systems. In this way, 60 per cent of the rural population that is without electricity would have been given a greater choice in acquiring cost-efficient and environmentally non-polluting energy systems.

A final concern relates to price differentials between diesel and kerosene which encourage rampant adulteration. The budget should have addressed this issue as well. A hike in the customs duty on kerosene for the parallel market may somewhat narrow the price differential.

There are, of course, encouraging trends relating to the rationalisation of the direct and indirect tax structure, but whether or not they will generate revenue required to balance the government's books and keep the fiscal deficit to the limit prescribed by the finance minister remains to be seen.A stronger statement with a more aggressive target would have been encouraging, notwithstanding the relatively lacklusture results in 1999.

-- The author is chairman, Shell Group of Companies, India