Sinha has decided to take advantage of Swadeshi to garner revenues from imports. He has stiffened import duty rates: the ten per cent rate is being replaced by the 15 per cent rate; and the 20 per cent and 30 per cent rates have each been hiked by five percentage points. This is perhaps in lieu of the special customs duty (5 per cent) which lapses on schedule on March 31. But Sinha's special touch is the ten per cent surcharge he has proposed on imports other than crude and petroleum products, gold and silver and imports which attract 40 per cent duty. Unless the recession lifts, imports might not get the finance minister the targeted revenue and the shortfall of 1998-99 will be repeated. Sinha is on firmer ground with the additional duty of Rs 1 per litre on imported and domestically produced high speed diesel. International prices have softened; instead of correspondingly lowering diesel prices, Sinha has sought to siphon out the difference: andto ward off pressures to roll back the levy, Sinha has earmarked the collections, estimated at close to Rs 5,000 crore, to road maintenance and development and to railways. Such cleverness, it is hoped, will work. Sinha has kept his promise of reducing eleven major ad valorem excise rates to three: eight per cent, 16 per cent and 24 per cent. This should make the system more efficient and plug loopholes. Fears that this simplification would mean merging lower excise rates into a high rate have been sought to be allayed by Sinha. According to him, the effective rate of excise taxation will remain either unchanged or go up by one percentage point or so. (Sinha is obviously playing down the imapct of duty rates change). Furthermore, in order to keep the excise reform revenue neutral, he has proposed a surcharge: of six per cent on items which currently pay 30 per cent, and of 16 per cent on items which pay 40 per cent. In the prevailing context of the recession, excise reliefs were expected by several sectorsof industry.

Sinha has decided to turn a deaf year to their demands. Will Sinha be able to ward off pressures for roll-backs in this budget of surcharges? Will industry be satisfied with the restoration of modvat claims to 100 per cent? The finance minister has assumed a fairly sharp rise in collections from excise duties. But fulfilment of the budget target hinges not only on industrial revival, but on tax enforcement. He has hardly held out any assurance on either.

Sinha has proposed total new taxes of Rs 9,334 crores: corporation tax Rs 1,100 crore; personal income tax Rs 2,000 crore; excise Rs 4,765 crore and customs Rs 1,469 crore. (So, his excise reform is not so revenue-neutral after all!) He has also proposed to raise Rs 10,000 crore from PSU equity disinvestment. Even so, the budget shows a fiscal deficit of Rs 79,995 crore. This after reducing non-plan capital expenditure by Rs 25,000 crore -- that is, the amount of small savings which would normally have entered the central budget and flowedto the states. Including this amount, the fiscal deficit works out to Rs 104,955 crore against Rs 103,737 reported for 1998-99 (revised). The fiscal deficit has been hardly reined in. The revenue deficit is (on the face of it) smaller at Rs 54,147 crore against (revised) Rs 60,474 crore for 1998-99. But as a proportion of the fiscal deficit, the revenue deficit has risen from 58 per cent in 1998-99 to 68 per cent (excluding small savings) in 1999-2000. The numbers are hardly reassuring. Sinha has gone in for taxes and mega PSU equity disinvestment; but he seems to be running harder to remain at the same place.

The other area where things could go drastically wrong is in government expenditure. The finance minister has talked bravely of curtailing growth in expenditure, and has accordingly budgeted for a much lower increase than warranted by trends. This is especially so for revenue outgo.

The trouble with Sinha's budget is that it lacks a strategy. Is it fiscal consolidation? Is it the revival of growth?A clear answer to neither question emerges from the budget, despite the hot air about entering the next century. Sinha needs tax revenues. That cannot be denied. But he has no cogent programme for raising the efficiency of tax collection and the tax-GDP ratio . The budget for 1998-99 made certain claims in this regard and put forward some numbers. Sinha is silent about promise and fulfilment. There was a shortfall in budget support to the plan this year. Sinha proposes to make up for this in 1999-2000. But since the fisc remains under pressure, the proposed increase in budget support to the plan is unlikely to be fulfilled. And should tax revenues not rise as assumed,- this is contingent on industrial revival - , or if revenue expenditure does not stick to the target, the large fiscal deficit will be larger; market borrowings will burgeon beyond the budget estimate, as happened in 1998-99. There is a sense of deja vu in Sinha's second budget. Although the level of market borrowings has been projected at arelatively low level, the pressure of the fisc. on the market will only tend to harden interest rates, thus deterring the revival of private investment. These worries of 1998-99 will spill over into 1999-2000.