In absolute terms, the increase in tax revenue (RE 1998-99 over RE 1997-98) was Rs 10,379 crore, while the budgeted increase in tax revenue is Rs 22,828 crore. The additional taxes imposed in the budget, both direct as well as indirect, amount to Rs 9334 crore. How the shortfall will be met is anybody's guess.

On the other hand, revenue expenditure has been budgeted to increase by 8.6 per cent. The increase in 1998-99 over the RE for 1997-98 amounted to 19.7 per cent. In absolute terms, the increase in revenue expenditure has been budgeted at Rs 18,848 crore, compared to the increase of Rs 35,939 crore (RE over RE) figure for 1998-99. Capital expenditure (adding back the Rs 25,000 crore on accountof small savings transfers) is budgeted to increase by Rs 8122 crore. The increase in 1998-99 over the RE figures for 1997-98 was Rs 10728 crore. The increase in capital expenditure over the increase in RE 1998-99 figures over the 1997-98 actuals is Rs 12,055 crore. The budgeted reduction does not augur well for increasing investment by the government.

This analysis brings out several facts: first, the Finance Minister's projections of tax revenue for 1999-2000 are optimistic, although unlike last time, an effort has been made to mop up revenue. Second, his estimates of revenue expenditure presuppose a major containment in expenditure, and he hasn't said how he will achieve that. Third, all pretence to kickstarting the economy has been abandoned, with the increase in capital expenditure budgeted at a low level.

Because of the unrealistic increase in budgeted revenue receipts and low level of expenditure projected, there will again be a wide gap between the deficit budgeted and that actually achieved atthe end of the year. This is all the more likely because this fiscal's supposed GDP growth rate of 5.8 per cent was in the main due to the high growth rate in agriculture, which was achieved because of the low base and negative growth in the previous year.

This year statistics will be against agriculture reaching a high growth rate. However, it is also true that not much revenue is contributed by the agricultural sector.

While ostensibly this budget is all about putting government finances in better shape, the figures tell a different story. In fact, this budget, makes unrealistic assumptions about pruning expenditure.

Corporate sector

The basic objective of any economic policy from the point ofview of corporates is that it must enhance the competitiveness of Indian business? This is not achieved by financial legerdemain. The quality of deficit reduction remains highly suspect. While the government's market borrowings have been budgeted at a comparatively low level, this depends on theachievement of the revenue targets. Since that is unlikely, the outlook for interest rates is not bright.

Corporate earnings will be impacted by the hike in corporate tax rates, and there will probably be an increase in costs on account of the increase in diesel prices. Some corporates will also be hurt by the increase in customs duties, although others will benefit due to the increased protection.

Resources for growth

Resources for growth can however be augmented substantially if the Gold Deposit scheme takes off. The trouble with schemes like these is that much of the gold is held in the form of jewellery, so it may have limited impact on bringing out gold hoards. Nevertheless, a new liquid savings instrument will be provided, and a hedge against rupee depreciation. Also important from the resource raising point of view are the exemptions granted to mutual funds.

The debt markets will greatly benefit from the decision to remove stamp duty in the demat mode, one of the factors holding back thedebt market in India.

Automatic approval for NRIs and approval for pharmaceuticals upto 74 per cent should also lead to some funds flowing in. The exemptions granted to the Unit Trust of India and other mutual funds should also lead to funds being made available for investment.

On the flip side, however, with no end to pressure on corporate earnings in sight, and with the political climate remaining uncertain, who will take the risk of putting up new capacity? The Finance Minister has attempted to use sops to housing as a tool to spur investment. The tax concessions given are large and will certainly help, but the fact remains that there exists substantial stock of unoccupied housing. It is the market for these houses, rather than new investment, which will, at least initially, get a boost.

Exportts will not be boosted by the lower dollar credit, as the benefit of forward premiums is not available to those who adopt this route to borrowing. The higher direct taxes will, albeit marginally, affectdomestic demand,which may however, be boosted by higher agricultural growth this year.

The tax deductions allowed on banks' provisions for doubtful debts, as well as extending the tax benefits available for corporate reorganisation will help accelerate the process of change in corporate India, making it more competitive.

While investors will benefit from the lowering of the long-term capital gains tax, and the strain on the UTI will be lifted, there are no positives for the long-term for corporate earnings, and the market will sooner or later factor that into its valuations.