Critics call it protectionist and inflationary, domestic industry is happy. The Union Budget for 1998-99 shows that the Bharatia Janatha Party cares more for politics than for economics even when formulating the budget. Ruling left wing Hindu nationalist party has opted to please its supporters though the budget has evoked sharp criticism from different sectors.
Presenting his maiden budget in the parliament the Finance Minister Mr Yaswant Sinha imposed eight per cent countervailing duty on all imports. Exemption is given to crude oil, news print, capital goods under the EPCG scheme, gold and silver imported by passengers or other nominated agencies and life saving drugs that are free from the customs levy.
This additional import duty is interpreted as protection granted to Indian industry houses loosing out to international competition. A set of family controlled business houses who are losers in the liberalized environment were reported to have supported BJP during the elections. The ruling party is utilizing the union budget to keep its supporters happy.
A look at the gainers and looser make things clear. At the receiving end are multinationals like Hindustan Liver, Nestle, Cadbury's and Smithlkine Beechem. The higher excise duty imposed could squeeze demand or profits. Power equipment manufactures like Asea Brown Broweri will have to work against an import barrage and higher steel prices will increase their manufacturing cost.
Indian companies which dominate steel, cement, paper, aluminum, copper and petrochemical have benefited by way of either reduction in the excise duty or from higher import tariff which will protect them from international competition.
Indian steel companies TISCO, SAIL and Essar Steel can make whoopee. A hike in the import duty will cut overseas competitors share. Earning could jump more than 50 per cent. Paper makers like BILT and ITC Bhaadrachalam should turn around sharply, since import cost have gone up by 20 per cent..
Cement makers ACC and Gujarat Ambuja will be protected by higher customs duties. Aluminum producer Hindalco and Nalco can now hike prices against higher landed cost. Profits can go up by 30 per cent for these companies. The massive increase in the public expenditure is to come from Rs 80000 million additional resource mobilization through increased customs and excise duties. The inflationary impact of this will be both direct , through increased cost and indirect , as a result of the increased level of protection domestic producers are likely to get both due to increased customs duties and a depreciated rupee.
Go To Page: 1 2
| Here's the follow-up discussion on this article: | View all related messages |
For a complete listing of article comments, questions, and other discussions related to Sebastian Dominic's Business in India topic, please visit the Discussions page.