The union budget for 1999-2000 has been a mixed one. The macroeconomic measures have largely focused on agriculture and social sectors including the small scale and housing sector. The measures to activate and deepen the capital markets have been significant. There has been a reduction in the stated borrowing requirements, but given the high levels, interest rates may continue to remain firm in the near term unless explicit measures are taken by the Reserve Bank of India.

The budget seeks to mobilise incremental funds of about Rs 6,000 crore through changes in indirect-tax structure. This may exert cost-push inflationary pressures in the economy. The expectation of additional resource mobilisation would be to a large extent contingent on a buoyant industry and import growth.

As the country integrates with the global economy, the process of corporate restructurings has been gathering momentum. The budget seeks to hasten this process by extending tax benefits forall forms of restructuring including de-mergers. The budget has accelerated the process of financial sector reform by taking concrete steps to improve the debt-recovery system.

The measures essentially include setting up of additional DRTs and DRATs, but the process needs to be strengthened. The decision to allow provisioning as a tax deductible item has brought our norms in sync with internationally accepted practices. This would encourage banks to make more conservative provisioning as a tax deductible item has brought our norms in sync with internationally accepted practices. This would encourage banks to make more less severe. The setting up of the Settlement Advisory Committee for nationalised banks would hasten the process of debt recovery.

The budget has focussed on soft sectors of the industry and the impact of the proposals has been positive on industry. The pharmaceuticals industry is likely to benefit from the proposal of extending the time period for the weighted reduction of expenditure onin-house R&D to 2005 and the review of the current drug policy. The sops related to research and development will benefit domestic companies.

The software industry has also been impacted positively as the budget proposes to treat expenditure on Y2K compliance as revenue expenditure and has also reduced import duty on certain items in this sector. The textile sector would again benefit generally from the budgetary measures as fabric and garment manufacturers would gain from the excise cuts; and the operation of the Textile Technology Upgradation Fund will give it an advantage in borrowing funds.