NEW DELHI: The Central government has kick-started the pre-budget exercise, with ministries preparing their budget wish lists, even as the nationwide elections are underway. However, this is a planned exercise as the permanent bureaucracy knows that once the new government is in place, it will be in a hurry to place a budget before the parliament and get it passed.
“We need to keep background papers ready for whichever government that swears in after elections; ministries have been asked to keep their papers ready,” said a top official. The Narendra Modi government had come out with an interim budget ahead of elections and norms for a full-year budget are to be placed before the parliament by early July, soon after the new government swears in. While all ministries feed into the budget-making process, most of the work is concentrated in finance and commerce ministries.
“Some of the abiding themes in all budgets, regardless of the government in power, have been rationalising or simplifying taxes, correcting the inverted duty structure in import duties and using taxation and subsidies to encourage Indian manufactures. So, our budget-planning will assume that these will remain an integral part of the new budget,” the official explained.
However, the crux of the challenge before commerce ministry mandarins is designing schemes to push India’s export sector, while protecting domestic manufactures from imports. Powerful trade partners like the US, European Union and Japan are increasingly taking India to task, demanding lowering of import duties and subsidies to Indian exports. For instance, officials said they have been forced to start work on a drastically modified export promotion scheme, which would cut duty drawbacks that are globally considered subsidies and have been targeted by the US in a complaint with the WTO. Others including the EU, Brazil, Russia, China, Japan, South Korea, Sri Lanka, Canada and Egypt have joined forces with the US on this.
The schemes are being re-designed so that they do not function as export subsidies. “Duty drawbacks are basically taxes foregone and that is considered a ‘prohibited subsidy’ by WTO. We will have to rework our whole duty regime now,” said Prof Biswajit Dhar of JNU. “One way out is to lower, and in some cases eliminate, duties on imports that feed into our exports. It would help ease pressures from our trade partners who are demanding lower duties on their exports to us, while making our exports more competitive,” said Dhar.
CHALLENGE BEFORE COMMERCE MINISTRY
The crux of the challenge for commerce ministry mandarins is in designing schemes to push India’s export sector, while protecting domestic manufactures from imports. Powerful trade partners like the
US, European Union and Japan are increasingly taking India to task,demanding lowering of import duties and subsidies to Indian exports.