REGISTERED No. D-(D)-72 The Gazette of India
EXTRAORDINARY
PART I—Section 1
PUBLISHED BY AUTHORITY
No. 99] NEW DELHI, SATURDAY, JUNE 18, 1977/JYAISTHA 28, 1899
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as a separate compilation
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MINISTRY OF FINANCE
(Department of Economic Affairs)
New Delhi, the nth June, 1977
Vo. F 18(87)-B(D)/77.~The following is the text of speech delivered bv the Finance Minister in the Lok Sabha on 17th June, 1977:—
Budget 1977-78
Speech of
Minister of Finance
17th June, 1977
(PART "A")
Sir,
1. I rise to present the Budget for 1977-78, the first Budget to be presented Toy
this the Janata Government.
5I0 THE GAZETTE OF INDIA EXTRAORDINARY PART I—SEC. l~\2 The massive mandate that the people of India gave the Janata Party in March this year was not just a vote against authoritarianism It was also a mani- festation ol our people's, desire for a reorientation and a reshaping of our economic policies so as to bring about speedy elimination of poverty and destitution In the last few weeks, our Government has taken several steps to dismantle the authoritarian and repressive structure erected during the dark days of Emergency. It is our firm belief that the open society we1 cherish will remain mtecure unless we can move forward with courage and sincerity to banish poverty, ignorance and disease from this ancient land of ours. Our Party's election manifesto sets out a coherent economic strategy, laying emphasis on both bread and liberty We seek to accelerate the pace of economic progress and to distribute its fruits equit- ably m a framework of democracy and individual freedom Judging by historical precedents, this is no doubt a highly challenging tasK. The House can rest assured that there shall be no weakening of our solemn resolve to work for the fulfilment of promises we have made to our people.
3 The Budget of the Central Government is a maior instrument for shaping the country's social and economic policies. Both because of shortage of time as also because of heavy commitments of expenditure on ongoing pioiects, it has not been possible for me to recast the entire fiscal structure in line with our rtuclared priorities Also, I did not have the benefit of consultations with the Planning Commission, which has been reconstituted only recently Our Party'y social and economic programme lays heavy emphasis on rural development, improvement of the lot of Harijans, Adivasis and other downtrodden sections eradication of unemployment and expansion of social services including slum cleai ance. Most of the projects in these areas fall in the State Plans For reasons which are well known to this House, it has not been practicable for me to consult State Govern- ments and to induce them to reorient their development programmes in accordance with our priorities Nevertheless, within the framework of the rather limited options open to me, I have endeavoured so to formulate my budget proposals that they reflect faithfully the philosophy, programmes and priorities of our election manifesto
4 Before I outline the broad strategy that has been adopted, I would like to share with the House my thoughts on the current state and prospects of our economy The Economic Survey has covered this ground fairly extensively, and I shall therefore be brief in my remarks on this subject
5 The most fundamental problem of the Indian economy continues to be its inadequate rate of economic growth In 1976-77, the rate of our economic growth was less than 2 per cent In the seventies thus far, our growth rate has averaged about 3 5 per cent per annum, far too short of our Plan targets And yet, while It would be wrong to assert that our country has not made significant progress since independence, the fact remains that even after twontyflve years of planning, we are unable to sustain an average growth rate of 5 per cent Clearly, a fresh examination of our planning priorities and techniques is called for
6 Another disturbing feature of the economic situation is the uneven dis- tribution of growth, which has accentuated regional disparities m the level of development. While a number of States have recorded impressive growth rates during the last fifteen years, it is also a fact and n matter for serious concern that in this very period, nearly one-third of districts have recorded virtually no growth, or negative rates of growth, in output The poor performance of these districts has both depressed the national growth rate and also led to a widening of disparities in the level of development, a phenomenon which has •disturbing implications for the sucessful functioning of our federal polity.
7. A significant consequence of low and unevenly distributed growth has been that the proportion of people living below the poverty line is today higher than it was in 1960-61 The available data show that this proportion had tended to decline from 1968-69 to 1973-74, but in all probability the situation has deterior- ated since then. The magnitude of the problem can bP assessed from the fact that in lt)73-76 the economy did not have the capacity to absorb the produc- tion of even 120 million tonnes of foodgrains The low level of purchasing power is a reflection of the chronic state of underemployment and unemployment which U faced bv large numbers of landless workers and small and marginal farmers The fact that the proportion of people living below the poverty line today is higher than in 1960-61 strengthens me in my belief that therP is need for a fundamental change in our economic policies and programmes _ The status QUO has disastrous implications for our future and our pepple are rightly clamouring
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lor a redirection of our policies To this task, this Government is fully com- mitted.
8 Rising prices have further accentuated the hardships faced by the common man As the House knows, the wholesale price index went up by nearly 12 per cent In 1976-7? Tms was due, in a l
9. It is a truism that in a country in which agriculture "accounts for nearly 50 per cent, of national income, the oveiall growth rate of the economy is cruci- ally linked to the performance of the agricultural sector t he poor performance of the economy in 1976-77 was largely because of the decline in our agricultural production
10 In the late sixties, Indian agriculture did exhibit signs of a naw dynamism. Unfortunately, the modernising impulses made only a limited impact on our agrarian economy This is evident from the fact that the rate of growth of agri- cultural production m the 1970s was not higher than in the 1960s Wheat is the only crop m respect of which there has been a rapid increase in production, but even there, the rate of growth of productivity has greatly slackened in recent years In the case of rice, there have been impressive gains in non-traditional States, but in maior rice growing States there has been no breakthrough in yields Crops like pulses, vegetable oilseeds and raw cotton show a stagnant trend. Clearly, we have to introduce somp new growth impulses into our agrarian economy, if we are to succeed in raising the agricultural growth rate to a minimum level of 4 per cent, per annum
11. Our development plans had hitherto deliberately laid emphasis on indus- tria'isation And we have also made significant progress in diversifying our industrial structure Yet, judging by the fact that industrial growth rate since 1965 has averaged only 4 ner cent as compared with the average annual growth rate of 8 per cent, from 1956 to 1964, the decade since 1965 can hardly be des- cribed as & decade of progress m industrialisation That an increasing emphasis on industrialisation should have coincided with a declinp in the rate of industrial growth is a phenomenon which calls for careful examination. In 1976-77, indus- trial growth rate did increase to 10 per cent However, there is ample evidence to suggest that this was due to a number of fortuitous circumstances so that the favourable resets of 1976-77 cannot bP taken as indicative of a more cheerful trend.
12 Both because of inadequate growth rate aiiH growing capital intensity of industry, India's industrial structure has been unable to provide a fast enouKh expansion of employment opportunities. As a result, the number of unemployed people on the hvc registers of employment exchanges has risen .sharply A high cost industrial structure ra1orin"
13 In the last two years, while India's exports have increased rapidlv. imuurts duilng 197G-77 were resti an led both on account of the bumper harvest of 1S75-76 and increased domestic production of tdich critical incut"- as fertilisers The raind increase in inward remittances has given added strength to India's balance nf payments and our reserves have gone up considerably Nevertheless, we wouM be foolish if we did nnt take note of the fact that our balance of pavment ptill rmams vulnerable to thp effects of sudden shocks, such as harvest fluctuations The current level of food stocks and foreign exchange reserves do give us wider options in the manngement of the economy than ever before Foreign exchange reserves will have to be snce stability, as also in accelerating the process of growth
14 The task ahead is to devysc an effective strategy for dealing with the problems of inadequate growth crushing poverty, unemployment. growing regional imbalances and rising DDCPS These are all interrelated problems and have to be tackled simultaneously, though the emphasis laid at any given period of time may vary in degree
5 i2 THE GAZETTE OF INDIA EXTRAORDINARY PAKT I—SEC.15 It goes without saying that in any strategy we devise, the Drimacy of agriculture has to be emphasised. In a country in which nearly 80 per cent of the people live In rural areas, a faster increase in agricultural productivity js almost a precondition of any successful programme for removal of poverty, for enlarging employment opportunities, for stabilising prices of essential goods and for expanding the domestic market for manufactured Roods. The primacy of agriculture implies that investment reauirementa of agriculture would be given the .highest priority. In spit? of the importance of agriculture and the repeated jvowal of the need to improve the condition of rural India, the rural sector has in the past not received a fair share of total investible resources. This needs to be rectified. Currently, irrigation potential is growing at an annual rate of about 2 million hectares. We have to evolve a plan to be able to double this rate In the next few years Both major and medium and minor irrigation works must be planned and executed as part of an optimal national strategy for water use. Similarly, there is an urgent need for stepping up investment in such crucial elements of rural infrastructure as roads, markets, and supply of pure drinking water.
16. The programme of agricultural development will have to be conceived not merely in terms of increase in agricultural productivity but also in terms of making all the households in the agricultural sector more or less vinble. This will require, simultaneously, plans for development of ancillary activities lite poultry and dairy farming, fisheriesr, farm forestry, etc Not only will thia involve the provision of necessary inputs but also the development of organisa- tions which will collect, store and market the produce for efficient marketing la vital to the success of all these varied activities. We must generate large enough employment opportunities in rural areas so as to slow down migration to urban areas This can best be achieved in the framework of an area-centred programme of integrated rural development, in which the needs of small and marginal farmers and agricultural labourers receive priority attention.
17 The provision of more resources, howsoever, vital, will not alone achieve the objective. The entire apparatus for utilising these resources will have to be completely revamped in order to improve their effectiveness It will require changes in the organisation for both planning and implementation. It will need more intensive effort at improving agricultural technology and much greater ex- tension effort. It will need speedier construction of dams, wells and channels, faster and efficient rural electrification, better water and land management, more timely supply of fertilisers and pesticides, a more organised supply of seeds and better storage and marketing facilities parts of the country have been able to achieve this What is needed is the spreading of such organisation, together with requisite resources, to those lagging behind Thf. effort needed would call for a total transformation of the agencies which are presently connected with agri- tultural develompefit
38 Primacy of agriculture does not Imply indifference towards, or neglect of, modern industry. All that it implies is that, in so far as a larger nroporrtion of invehtible resrources availablp to the public sector is diverted to agricultural development, resources for industrial growth will have to be found increasingly by enterprises themselves generating Laflger Internal resources of their own through more efficient ot>eration a,^ well as more effective pricing policies Gov- ernment will a'so continue to pay ^articular attention to the development of industries such as fertihsersr pesticides, cement, power and petroleum which have an important bea^lne on apiricultxiral productivity In order to create greater cost consciousness in Indian industry, it ia our intention to introduce, gradually, more competition bv way of a more liberal import policy In addition, ways and means will be found to make possible optimal use of capacity in existence Simultaneously, in executing new projects, we musrt avoid delays which lead to escalation of capital costs It is usualW not realised how great is the cost of these delays An analysis for cost escalations in 1& proiects which had secured the approval in 1976-77 of the Public Investment Board shows that in thesp pro- jects, investment costs had increase to Rs 555 crores as aeainst YIP original estimtte of about Rs 255 crores, ThLs serves to emphasisp the importance of timely execution of projects and the extremelv high social cost of delay.
19 Some of our large industries, such as textiles, are today in serious trouble and are in particular need of replacement and modernisation Therefore, ade- quate resources will have to be Provided for investment in these sectors The present arrangements which the Industrial Development Bank of India a^d the other term lending institutions have for this purpose will havP to be continued.
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S£lso, efforts have to be made to ensure that these industries generate more internal funds and, thus, do not face conditions which ultimately make them eick. I believe it might be a good idea, if the managements of more efficient mills were to be prevailed upon to take over, as an act of social responsibility, some of the sick units and nurse them back into sound health under conditions to be laid down by Government,
20. Faster and timely development of power is an essential condition of ac- celerated economic progress I am convinced that much more remains to be done in respect of both power plannmg and development if we are not to have to face recurring severe shortages of power. Power is now recognised to be as essential to agriculture as to industry and shortages of power can disrupt the production of food as much as of cloth. We shall therefore make every effort to hasten the pace of expansion of power in the cominc years
21. There is another field, however, in which modern industry needs to be developed further and that ia the field of exports, Experience haa now been gained with regard to marketing a wide variety of manufactured ,goods, parti- cularly engineering goods, in fongn markets Since this is the field in which world trade is growing fastest, we should push ahead in this area. This means building up more capacity, acquiring suitable know-how and adopting even better marketing techniques While I do not regard export led growth as a viable proposition in Indian conditions, it is necessary that exports should con- tinue to increase at the rate they have been growing in the past two yeais Such an increrasre is essential for acquiring greater manoeuvrability with regard to economic management. Government is committed to provide a stable policy framework conducive to continued expansion of our exports Simultaneously, it ia our solemn resolve to deal firmly with smugglers and other antisocial elements indulging in illegal dealings in foreign exchange Fortunately, judging by recent data on inward remittances, smuggling does not seem to have revived on any large scale We shall, nevertheless, remain vigilant in this matter.
22. Since unemployment is one of o.ir most pressing problems, the greatest attention needs to be given to its solution By now, It i3 obvious that this pro- blem cannot be solved through exclusive reliance on industrialisation. New strate- gies have, therefore, to 6e evolved to provide gainful employment on a large scale in the rural areas themselves. The accelerated growth of agricultural production will in lUulf increase the scope for employment in the rural areas It is interest- ing to note that labour input per acte of land in Japan is four times the corres- ponding level in India, This is an indication of the scope for generating new t mployment opportunities in the process of modernising our agriculture Moje irrigation, better cultural practices, double-cropping, increased use ot fertilisers nnd weeding will certainly create mere 3Obs, but it will have to be ensured that piemature mechanisation does not anect this process adversely. Faster agricul- tural growth will ofler greater scope for employment in such ancillary activities tie repaying, servicing, frt.nspoitatlon, etc Simultaneously, greater attention TMII hkve to be paid to the development of rural infrastructure, particularly the con- struction of rural roads Proper marketing of agricultural produce cannot take place if there is no adequate network of roads connecting our villages to the nearest marketing centres Deliberate steps will also have to be taken to facilitate processing of local produce so as to provide more employment m rural areas Gandhyi's idea of self-reliant rural communities will have to be. given concrete shape i£ an effective solution is to be found to the problem of unemployment
23 I he development of small scale industry should also enable us to make a significant dent in the problem of unemployment Such industry should not be a scaled-down /ersion of large Industry but should be one which uses technology which is appropriate to our conditions of surplus labour and scarce capital, Al- though there hns been a great deal of talk of appropriate technology, it is surpris- ing how little effort we have put into its development. For example, Ihf bullock-cart remains and will remain for many years to come an important means of transport in rural areas. Yet, it is only very recently that we have started thinking about improving its effectiveness Unfortunately, insufficient re- sources have been devoted to the development of appropriate technology We have always gone after the most modern technology even though it may not necessarily have been the most efficient for us This trend needs to be reversed.
24 We do not however have to wait for appropriate technology In order to make e beginning in this field The experience of handlooms and powerlooms shows how moae*:n organisation and marketing- methods can breathe life into labour
JJA THE GAZETTE OF INDIA EXTRAORDINARY PART I—SEC. IIntensive Industry, More work along Ihcse lines should be tried with regard to number of cottage and village industries in order to combine greater employment with efficiency.
25 The problem of unemployment in urban areas, particularly among the educated persons, is no loss serious. The House will be happy to know that we are now working on the details of a specific scheme designed to create opportuni- ties for the educated unemployed. Under this scheme, we shall provide through the banking system "seed'1 money tnd other finance at relatively attractive rates of interest to enterprising young men considered eligible for assistance.
26. The beneficial effects of a high rate of economic growth can easily be neutra- lised by an increase in population Therefore, population control has to be an Integral part of our programme of raising the Standard of living of the common man. Unfortunately, the events of the past two years have given the family plan- ning programme a severe setback just when it was beginning to be generally ac- cepted even in backward areas. This programme as so vital to our economic pro- gress and well-beintj that all possible efforts must be made in a sustained way to persuade people to accept the small family norm Any investment, therefore, that if necessary for this purpose should be undertaken without any hesitation. And because it is our firm determination to achieve our objectives through persuasion rather than coercion, the effort that will have to be put in will have to be greater and more sustained.
27 The success of the programmes J have been talking about depends upon adequate resources being available. Other countries which have achieved high rates of growth have been able to invest as much as 30 per cent of national income because of their high volume of savings. The Indian experience has been other- wise. Voluntary savings have been inadequate Attempts to push up the rate of domestic savings through created money and deficit financing have accentuated in- flationary pressures but have not succeeded in raising the savings rate. Thus, some fresh thinking s necessary regarding the mfans of enlarging the pool of national savings in a non-Inflationary manner.
28, It is doubtful if taxation can achieve such an increase High direct tax rates have been found to be counter-productive because of the evasion that ensues, and, in any ease, the number of people wno fall in the direct tax net is so small that revenue realisation cannot match requirements Indirect taxation seems also tc have reached its limit
29 Resource mobilisation by the Government through taxes has increased con- tinuously over the years and at present tax revenue as- percentage of national in- come is as high as 18 9 But public saving has not gone up because non-develop- mental expenditure such as interest chaiges, salaries and wages, dearness allow- ance to employees detence expenditure and subsidies etc , have gone up more thc^i proportionately. In addition, public sector enterprises have not been earning, until recently adequate return chiefly because of deficiencies of management and impro- per pricing policies Some of those shortcomings will have to be removed if public saving is to increase and contribute to larger investment.
30 Individual saving can be promoted better if austerity is practised much more effectively A large part of the increase in consumption arises from the demonstration effert of the high standard of living of the wealthy and thf well-to do in our society, To neuiiallse all this, sreater egalitanamsm 'n consumption needs to be practised Our tax system has to Lie so reoriented as to dit,eoui"ige ostenta- tious living and promote the habit of savings However, austerity cannot be usher- ed in merely through tax reform We must arouse public opinion against a life style inconsistent with the hHrsh economic realities of a poor country such as ours.
31. Government ha=t b^en greatly concerned about the price Situation ever since it came into office. The persistence of the rising tendency in priced witnessed, during the last I*w weeks has been due, pjrtly to the cumulative eilect of unbal- ances Introduced last \e.ar and partly due
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grams to meet all genuine requirements at stable pncea We have inherited a • difficult situation regarding vegetable oil^ As the House knows, beuause ot a. bi^cp tall in production of groundnuts last year prices of vegetable oils have been rising for culte some ' 1/nc Unfortunately, gruvndnut oil cannot be readily impoite'i .->o that our ability to operate directly on the supply of this oil is rather limited. How- ever, we have ^rrungej fo* adequate imports of other vegetable oils, Thesp phoiild help to stabilise the price of cooking media Increased availability ot vanaspati and refined rapeseed oil meant lor direct consumption would indirectly ease pressure on prices of groundnut oil. We have adequate stocks of sugar to enable us to meet all reasonable demands at stable pricea We are now working on the details of a new multiflbre policy designed to make available quality cloth at prices within the reach of the common man Such a policy, if successful, would have the additional advantage of restoring to health all segments of India's largest industry
BUDGET ESTIMATES
32 I now turn to the Budget Estimates The documents which I am presenting today repeat the Re.ised Estimates for 1976-77 as given in the interim Budget, as the actuals are not yet available in most cases.
33 As regards Ihe Budget Estimates lor the current year, gross tax revenues at existing rates of taxation are estimated at Rs. 8879 crores, showing on increase of Rs 793 crores over the Revised Estimates for 1976-77. Of the increase. Rs. 101 crores will accrue to the States as their share of taxes. While Union Excise Duties are expected to yield Rs, 4550 crores, showing an increase of Rs 373 crores over the Revised Estimates, for last year, receipts from Income an
34. Market loans are expected to yield Rs 1000 crores as compared to R3 P49 rrores in the previous year Besides, Government propose to borrow Rs 800 crores against drawal of foreign exchange reserves.
35. Net external assistance, after providing for repaymenta an^ interest pay- ments, is estimated at Rs, 1052 crores, including disbursements against new credits.
36 Taking otnei receipts into account total receipts in the curro.it year are estimated at Rs 1536G crores.
37 I may now make a brief mertion of the estimates of non-Plan expenditure. While presentinn the interim Budget, I indicated that all Ministries and Depart- ments of Government and public sector agencies will be asked to observe the utmost economy m expenditure, keeping in view the present Government's empha- sis on austerity and avoidance of all forms of ostentation. Detailed instructions have since been issued in this regard for strict compliance by all Ministries and Departments The full Impact of the economy measures will be known only after thy detailed e j e m s es have been completed Separately certain areas of non- essential expenditure have alrcadv been identified and the Budget documents reflect a reduction of about Rs. 130 crores in these expenditures as a reuslt of this exorcise
38 The provislcn for Defence expenditure is Rs. 2752 crores, Rs. 58 crores less than the provision n.ade in the interim Budget. The provision for food subsidy Biid carrying costs of bufter blocks has been for the present, retained at Rs 460 croretf, but it will be reviewed on the basis of emerging trends during the course of the year
'.id In its schema of devolution, the Sixth F.i ance Commission could not take into account the net mteiest liability of States on account of loans raised and disbursed by them during the Fifth Plan period for want of details As recommended by that Commission, the net interest liability of the deficit States has been computed an/i a provision of Rs. 72 crorea has been made In the Budget for disbursement of uddi- flonal grant-in-aid to the States concerned on this account, in relation to the thr^e years ending on 31st March, 1977.
40 I have received requests from Central Government pensioners for increase in the quantum of relief on their pensions in view of the high cost of living, AS the House is aware, a measure of relief has been afforded from time to time in rtfte past. I feel it would be only fair at this stage to grant a special relief at groded rates to them; this will cost the exchequer Rs. 10 crores annually.
^g THE GAZETTE OF INDIA EXTRAORDINARY PART I—SEC.41. I now turn to the outlays on the Annual Plan for 1977-78 Aa I have already Indicated, we are firmly of the view that our economic alls can be overcome only through a comprehensive reordering of Plan priorities The Plan strategy has to be reappraised. It should recognise the primacy of agriculture and accord overriding priority to rural development and eradication of unemployment within a time frame. These are the tasks to which our reconstituted Planning Commission will no doubt address itself. That, however, will take some Lime. In the mean- while it is necessary for the Government to move m the desired direction That Is what this Budget seeks to do.
42 Within the short time available to us, we have therefore made a quick review in consultation with various Ministries of the outlays in the Annual Plen for 1977-78, and tned to impart, to the extent possible, a new direction to our development programmes in line with the priorities and objectives set out in tho Manifesto of the Janata Party. We are, however, not writing on a clean slate Schemes in progress connot be abandoned, nor even slcAved down unduly, without considerable financial loss The commitments made to State Governments in regard to Central assistance for their Plans have also to be honoured bubject to the conditions stipulated by the Planning Commission at the time of the flnalisation of their Plans These commitments do impose serious limitations an refashioning the Plan according to our thinking. The room for manoeuvrability is thus limited. Even so, appreciable savings have been effected Schemes of relatively low priority have been suitably rephased
43. True to the promises made to the people, in the recast Plan, we have now provided for additional outlays for agriculture. Irrigation, power, khadi and village industries, sericulture, handlooms, postal and telephone facilities in rural areas and wide ranging rural infrastructure programmes covering, among other things, such schemes as durable link roads and rural drinking water supply It is °ur intention to step up further the outlays next year on programmes designed to develop rural infrastructure facilities so that over a period of, say, five years the basic needs of the entire rural population could be met It is also our intention to review the programmes of slum clearance and urban renewal in consultation with the States and to provide additional resources for accelerating the pace of execution of these programmes
44 The allocations from the CenLral Budget in 1977-78 for the Central Plan and assistance towards Plans of States and Union territories1 will be Rs 5790 crores The corresponding figure for the previous year was Rs 4750 crores The tempo of development is thus being maintained
45. The provision for the Plan in the Central Budget Is inclusive of R,s 1812 crores on account of Central assistance for State Plans and provisions for Union territories Hans, the sub-plan of the Hills and Tribal Areas, the North-Easteru Council, and assistance to the Rural Electrification Corporation for power schemes. This allocation also includes an element of special advance Plan assistance t<"' Stales to provide them adequate resources for the required level of investment in important projects in the core sectors of irrigation and power. A provision of Rg, 3978 croros' has been made in the Budget towards Central Plan. Inclusive of the internal and other resources of public undertakings, the Central Plan will be of the order of (Rs. 4939 crores in 1977-78 as against Rs 4090 crores in 1976-77 The State and Union territories Plans togeiher will be of the order of Rs 5021 crores, as against Rs. 3762 ciores in 1976-77 The total outlay on the annual Plans of 1he Centre, States and Union territories for 1977-78 will be Rs. 99G0 crores, as against Rs 7852 crores in 1976-77 This represents an increase of 27 per cent.
49. We feel that for building a forward looking, dynamic and diversified agricultural economy, it is necessary to aim at integrated development "f crop production, livestock and poultry, fisheries end forestry. Special emphasis will need to be laid on development of dairy industry on a cooperative basis with a, view to enabling milk producers to get better and fair prices. Creditable progress has been made m the first phase of Operation Flood Scheme and we must now get moving to take the full advantage of Operation Flood Phase II. The production policy should be based on modernisation of agriculture in which technology should, bv far, be the most crucial input to make a sustained and high growth rate possible The existing Plan provisions and priorities have been rephased with a view to locating gaps in development and identifying the potential areas where increased Investments could bring about further acceleration of the pace of agricultural, giowtta. In thia exercise we have kept in view the need f"r (a) strengthening
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rural infrastructure a
^ 47- Irrigation holds the key to increased agricultural production Though the Fifth Plan envisages, a target of 5.8 million hectares to be brought under irrigation the financial outlays do not match the target Further, the need for initiating action in the current Plan on new irrigation projects, so as to have an adequate pipeline of projects has been neglected. Greater emphasis will also have to be laid on modernisation of irrigation projects so as to conserve water which is a scarce resource Keeping all these ends In view, we propose to provide Rs lfld crores as advance Plan assistance to States for irrigation projects.
48 The Plan outlays for minor irrigation will be supplemented to the extent of about Rs 2fiO rrores from the Agricultural Refinance and Development Corporation, and other lending institutions Under the programme of rural electrification for energising the pump sets, we have made a provision of Rs 175 crores which will also bo augmented to Q significant extent by institutional finance 49 The lotal Plan outlay on agriculture and allied services, major, medium and minor irrigation projects and fertilisers, together with provisions for cooperatives and power sectors attributable to rural areas, works out to Rs H024 crores. The House will top glad to know that this constitutes 30.4 per cent of the aggregate outlay of the Central, State and Union territories Plans.
50 While the development of Natton.il and State highways has received reason- ably adequate attention in successive Plans, the needs of rural areas have been sadly neglected. I feel that the Centre should take the initiative m promoting the construction of opproaei roadg which constitute an essential ingredient of any programme for baildmg up the infrastructure for rural development. We therefore propose to make a beginning with an outlay of Rs. 20 crores which, suitably supplemented with the resources of the State Governments and local bodies, Will accelerate the programme m this vital area. The new scheme of 'gram for work' could also be utilised imaginatively for this purpose.
51. Despite three decades of planning, there Rre still a large number of villages which suffer very acute scarcity of dunking water While the responsibility for finding iesources and execution of the programmes for this purpose is that of the State Governments, I feel that 1he Central Government should also intervene actively and supplement the efforts of the States Such supplementary assistance should be dnectod towards provision of drinkine water facilities m problem villages to be identified with reference 1o objective criteria. We propose to make an earnest start m the current year wilh. an additional provision of P-s. 40 crores over and above the existing outlays for this programme Progressively, the allocations for th.s programme would be sicpped up so as to carry the benefits of the programme to all the problem villages over a period of five years The programme will h..-ve to be closely monitored at the Central as well as the State level
52 I would flso like to refer hero to schemes for the welfare of Hanjans, Adivasis and r.ther less advanced sections of our people As I have said earlier, C f l n d" Place largelv in State Plans I am not satisfied with the programmes and allocations ir respect of them and it is my intention to take up these matters on a priority basis with State Governments and Central Ministries concerned so as to add to the effectiveness of these programmes.
both designed to minimise loss of energy.
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^!8 THE GAZETTE OF INDIA EXTRAORDINARY PART I—SEC. 1 -to the Oil and Natural Gas Commission foi their on-shore exploration, programme and for acixlurating the pace of ott-shore exploration vVe have recently cleared the scheme for development of oil and natural ga;, resources of Bombay High a nd Bassem fields Indigenous production of crude oil is expected to reach 11.31 million tonnes in l'J77-'/8 as compared Mill 8 89 million tunnei in ly76-77
,r)5 Having regard to the ditPcult power situation of Tamil Nadu, a special provision ol Rs. 5 crores hat. been made for Neyveh Lignite Corporation lor a new lignite based power plant with a capacity of 200 MW.
Sti After taking into account the feasibility of rephasing the expansion programmer of the Bhilai and Bokuro complexes, a budgetary allocation of Rs. 511 croics has been made for steel as compared with Rs 402 crorea in 1976-77
57 The budgetary allocation for transport and communications will be Rs. 651 crores, of which Rs 302 crores will be for the Railways, which have a Plan outlay of Rs 480 crores A provision oil Rs 10 crores has been made for metropolitan transport projects, of which R-<>. 8 6 crores is for the Mass Rapid Transit Project of Calcutta A pint of the Sixth Corridor Proiert for rapid mass transit system In Bombay has also been sanctioned.
58 The PU>n for communications, including Posts and Telegraphs, has been modified to take into account the priority requirements of rural areas. Accordingly, an additional outlay of jRs. 10 crores has been provided for opening more post offices and extension of telephone and telegraph facilities in rural areas
59 It Is our belief thai khadl and village industries, if they are properly organised a id supported, are capable of generating employment on a large icale A mrv'sion of Rs. -55 crores has been made for these programmes in the Plan, with the understanding that more funds will he allocated if required It Is expected that the schemed in view will provide employment for about 25 lakh persons
60 An ouiltv of Rs 20 crores is provided for handloom and Rs 4 crores for sericulture which is a substantial step up over last vear These addit,ona j ^ ys have been made with a view to giving a fillip to these rural and labour intensive induidnes
fit Takins into account the expenditure both on Plan and non-Plan counts and the U S S ed rerexpts at existing levels of taxation, the Budget for the curreni year shows a deficit of Rs. 202 crores
519
^20 THE GAZETTE OF INDIA EXTRAORDINARY PART I—SRC. 1521
C22 THE GAZETTE OF INDIA EXTRAORDINARY PART I—SIC. 1523
524 T HE GAZETTE OF INDIA EXTBAORDINARY PART I—SSC I&5
#2fi THE GAZETTE OF INDIA EXTRAORDINARY PART I—SBC. 1527
^28 T HE GAZETTE OF INDIA EXTRAORDINARY FAKI I—3K". 1529
53o THH GAZETTE OF INDIA EXTRAORDINARY PAHT I—SEC. 1BUDGET 1977-78
SPEECH OF
MINISTER OF FINANCE
17TH JUNE, 1977
(PART "B")
DIRECT TAXES
62. I thaXL now address myseli to the task of formulating, proposals for qovering the deficit to the extent feasible,
69. The proposals, in so far as direct taxes are concerned, which I am pre- •tnting before you, are designed to increase corporate savings, channel more funds Into productive Investment, accelerate the pace of industrial growth and, at the same time, strengthen the ^distributive role that direct taxes, to my mind, must be made to play,
64, In so far as indirect taxes are concerned, I have endeavoured to ensure that my proposals do not impinge on the necessities of lile. There, I have sought to raise resources, in the main, from the less essential or luxury items, while giving jrallof to some deserving sectors, and simplifying and rationalising the central #xcis" tariff structure generally.
68. In fulfilment of an assurance in the Janata Party manifesto, I propose to provide that no income-tax shall be payable by individuals and Hindu undivided families whose taxable income does not exceed Rs. 10,000. In order, however, to keep the sacrifice of revenue to the minimum the mil rate slab of income ifl being retained at Rs. 8,000. Hence^ where the taxable income exceeds Rs. 10,000, the excess over Rs. 8,000 will be charged to tax as at present subject to the grant of marginal relief m cases where the taxable income exceeds Rs. 10,000 by a small margin.
66. I do not propose to make any change in the i>asic rates of income-tax. However, in view of the imperative need to raise additional resources, I propose to Increase the rate of surcharge on income-tax in the case of all categories of taxpayers, except companies, from 10 per cent, to 15 per cent. With the Increase In the rate of surcharge, the maximum marginal rate of personal Income-tax will now be 69 per cent., as against 66 per cent, at present.
67. It 13" my feeling that wealth-tax rates were reduced in the Budget of 1876 to an unjustifiable extent. If the essential objective of a wealth-tax is to be achieved, it must be so devised that while it does not become oppressive "nd counter-productive, it does have an effect on excessive accumulation of wealth in individual hands. In this view of the matter I propose to raise the rates of wealth-tax. The existing rate of half per cent will continue unchanged on the first Rs. 2 6 lakhs of net wealth, but for the higher slabs there will be an Increase of half a per cent, over the existing rates, while in the highest glab of over Rs. 15 lakhs, the new rate will be three and a half per cent, that la an Increase of one per cefit, over the existing rate. There_wlll be correspond- ing" changes in the rates applicable to Hindu undivided families having one or more members with net wealth exceeding Rs. 1 lakh. The new rate schedule Will come into force from the current assessment year and will thus supersede |h" changes made last year in the rate schedule These changes will result in an additional revenue of about Rs 10 croreg in 1977-78.
531
. 1 \^B £On bif Members are aware, Government have already dispersed with the Compulsory Deposit Scheme in its application to additional deanie^ allowance as Irom 6th May, 1977. Having regard, however, to the state ox me economy and the inflationary pressures tnat exist, j. propose to continuo ihe Compulsory Deposit Scheme lor Income-tax Payers for another two years.
69. With a view to stimulating industrial development and economic growth, I consider it desirable to widen tne scope of the scheme of investment allowance introduced last year. That s^neme, has umorcundteiy not iaia down any well- defined and clear criteria for selecting industries to which the benefit of the concession was to be extended. This made it difficult to explain to those claiming eligibility why some industries had been given the benefit, while it was denied to others. Since there is a need for encouraging generation of internal resources IOI financing investment, 1 consider it best to extend the scope of investment allowance to an industries except ihose which are engaged in the manufacture of specified low priority items such as cigarettes, cosmetics and alcoholic beverages. This measure will be of great benefit to the economy.
70. In order to promote scientific and technological self-reliance, I propose to provide an incentive to the users of technical Know-how developed in our country. It is accordmgly proposed to grant investment allowance at the higher rate of 35 per cent, on machinery and plant installed tor the manufacture of any article made in accoidance with know-how developed in Government laboratories, public sector companies and umveisities.
71. From the point of view of maximising expansion of industr, I can hue little merit in compelling closely-held industrial companies to distribute a high percentage of their net profits as dividends. I propose, therefore, to exempt such companies from the requirement ol compulsory distribution of dividends. I do not propose to extend this relief to all other kinds of closely-held companies.
72. It is my belief that the present structure of capital gains taxation stands in the way of .adequate monthly ot investibie resources, and peipetuates investment in low priority assets. In this view, I am proposing certain changes in our existing 3cheme of capital gains taxation.
(a) At present capital gains arising from the transfer of a capital asset held by a taxpayer for a period exceeding 60 months alone *u~e entitled to concessional tax treatment. With a view to impioving mobility, I propose to reduce the holding period to 3d months. (b) In respect of capital assets acquired prior to tho 1st of January, 1&54, a taxpayer has the option of adopting the fair market value of the asset on 1st January, 1954 in place of the actual cost of acquisition. Determination of the fair market value of a capital asset with reference to a date more than 23 y"ars ago presents practical difficulties. Moreover, capital gam arising from the transfer of assets held over a length of time is, in a world of rapid and continuing Inflation, to a great extent illusory in nature. On the whole, therefore, it seems to me desirable to advance the notional date by 10 years, namely, to 1st of January, 19Q4.
(c) Capital gains tax is payable on the sale of a residential house. The existing law provides that if another residential house is either purchased or constructed within a specified tune, then the capital gains can be wholly or partially exempted depending upon the amount of capital gains utilised on the new residential house. Similar concessions are not available in respect of capital gains arising from sale of assets, such aa jewellery or shares. I see no reason for drawing such a distinction. Accordingly, I propose to exempt the capital gams from tax, if the sale proceeds of any asset are reinvested within six months in shares, bank deposits, units of the Unit Trust or other preferred assets. In order to prevent abuse of this concession, it is required that the assets in which the ' sale proceeds have been reinvested are held for a period of not less than three years.
73 Sicknesi among industrial undertaking! is a matter of grave national concern! Closure of any sizeable manufacturing unit in Bny industry entails
532 THE GAZETTE OF INDIA EXTRAORDINARY PART I—SEC. 1social costs In terms of loss of production and employment, and also waste of valuable capital assets Experience has shown that taking over of such units by Government is not always the most satistactoiy or the most economical solution. A more effective course would be to facilitate the voluntary amalgama- tion of sick industrial units with sound ones by providing certain incentives and by removing impediments in the way of such amalgamation. It is accordingly proposed to provide that where an amalgamation is accepted by the Central Government to be in public interest, the accumulated losses and unabsorbed depreciation ot the amalgamating company will be allowed to be carried lorward and set off in the hands of the amalgamated company.
74. With a view to encouraging companies to involve themselves in the work of rural welfare and uplift, I propose to provide that expenditure incurred by them on approved programmes of mral development will be allowed to be deducted in computing their taxable profits.
75 In order to "give a direct stimulus for the setting up of small-scale industrial undertakings m rural areas. I intend to accord preferential tax treat- ment to industries which are set-up m such areas,
76. Under a provision made last year, companies were given the option. Instead of paying 6 per cent surcharge on income-tax, to deposit an equivalent amount witn the Industr;al Development Bank of India for a period of five years. I propose to withdraw this option. The Budget accordingly takes credit for an additional tax receipt of Rs, 56 crores on this account.
77. The amount of donations for charitable purposes qualifying for tax exemption is limited to 10 per cent of the gross total income of the donor, subject further to" a monetary ceiling of Rs. 2 lakhs. It is felt that this ceiling is unduly restrictive and only discourages more liberal donations to deserving charities I propose accordingly that the monetary ceiling be raised from Rs. 2 lakhs to Rs. 5 lakhs.
78. Fifty per cent, of the remuneration received by Indian technicians from a foreign Government or a foreign enterprise for services rendered outside India is exempt from income-tax We cannot justifiably deny this concession when the employer happens to be an Indian concern. I propose accordingly to enlarge the scope of this concession to cover Indian technicians employed by Indian concerns in any branch or office outside India.
79 Deduction of tax from small dividends has been a source of considerable hardship to a large number of small investors in joint stock companies With a view to avoiding inconvenience to such investors and in particular to investors from rural areas, the requirement of deduction of tax at source from dividends will be waived in cases where the dividend paid does not exceed Rs. 250.
80. Under a provision made by the Taxation Laws (Amendment) Act, 1975, charitable or religious trusts and Institutions are required to invest their funds in certain forms and modes specified m the income-tax Act. Any trust or institution which does not conform to the prescribed pattern of investment m any accounting year commencing on or after 1st April, 1978 would lose exemp- tion from income-tax Having regard to practical difficulties involved and to ensure a more orderly change-over m their pattern of investment in line with the new provisions, tho date for change-over to the new investment pattern is proposed to be extended by three years, i o, from 1st April, 1978 to 1st April, 1981.
81. I have taken credit for increasing the surcharge on income-tax and increasing the rates of wealth-tax. The loss of revenue involved in exempting individuals, Hindu undivided families, etc with an annual income up to Rs, 10,000 has also been taken note of The overall effect of all the direct tax proposals would be a gain to the Centre's revenue of Rs. 92 eroros in th> current year
533
82 As Honble Member*, arc- awaie. the direct taxes statutes have become increasingly complicated and incomprehensible over the years. It is, therefore, necessary to take "immediate action lor the simplification and rationalisation of these laws with a view to making them readily intelligible to the taxpayers, reducing litigation, and, thus, subserving the interest of the national economy. It is also necessary to examine wavs and means of improving the administration of these laws and expediting assessment appellate and other proceedings under these laws It has, therefore, been decided to appoint a Committee of eminent experts to make recommendations for the simplification and rationalisation of the direct tax laws It is my intention to ask the Committee to submit its report before the end of the year
INDIRECT TAXES
83 Now I come to my proposals with regard to indirect taxes My p i o- posals concerning central excise fall into three categoiios the fust relates Loe proposals for raising additional resources the soco id 10 i eduction or abolition of excise duties, and the last set of proposals seeks to rationalise and simplify the duty structure,
84 A 10 per cent excise duty is proposed to be levied on the following five items' (i) hand tools, and small tools not already excisable, (n) weighing machines and weigh bridges, (iii) watches, clocks and time-pieces, (iv) electric light fittings and (v) polishes for footwear, metals cars, etc It is also proposed to levy an excise dutv of 12 per cent on acetylene gas Small scale manufac- turers of hand tools and small tools, electric light fittings and polishes, will, however, be exempted in respect oC their production ur> to Rs 1 lakh, These levies are expected to yield a revenue of Rs, 11 crores in a year
R5 As Hon'blp Members arc aworf* in lf)75 as nn experiment a1 measure n 1 per cent general excise duty was levied on commodities which did not attract excise duties under any specific heads The experiment has succeeded in the sense that without imposing any undue burden or harassment we were able to collect an appreciable sum of money, namely Rs 37 crores When we stand in need of additional resources, it seems eminently suitable to raise this rate to 2 per cent Tn order to r"immise the cascading effect P sp+ off will be given where these goods go into the manufacture of other goods that are themselves excisable
86 Realising that under this excise head fall a large number of small units producing a variety of cjoods I have nrovirlp^ th^t in -lut" w in be 1"^ied r>" any unit whose ~ annual turn over does riot exceed Rs 30 laMis This, will replace trip existing exemption hdseH nn 1hp number of workers I am also exempting all non-power 'operated units from this levy
87, Further, small newspnnprs have already been exempted from this tevy, It is now proposed to extend this exemniin--, to medium newspawrs also. The big newspapers will continue to pay "duty at the existing rate of 1 per cent
88 The net additional yield from this group of proposals is expected to be of the order of Rs 30 crores in a year
89. I now come to the hardy annual namely tobacco products, At present the rate of ad valorem duty on nigareties increases as the value of cigarettes goes up. The progression in the existing rates is now proposed to be raised In regard to branded birls it is propo-ed to raise the existing dutv of rupee one nor thon=onrl +n run^es twn OPT tVifvsnnH Tbnsa loving jrp estimated to yield an additional revenue of Rs 45 crores in a year
90 The present system of taxing cinematograph films is baspd Drimarilv on the length and the nature of Ihe film and the number of nriut^ I imVnd changing the basis and adopting the value criterion the revised dutv being 10 per cent ad valorem This is a much fairer criterion,
534 T HE GAZETTE OF INDIA EXTRAORDINAEY PART I—Sue. 192 The excise duty on motor vehicles is also being raised. The rate of duty on motor cars js to go up by 2i per cent to 17j per cent. Similarly, the rate of duty on two-wheeler r nd three-wheeler motor vehicles is proposed to be raised from 9 per cent to 12} per cent Since I propose simultaneously to exempt from excise duty tvros, tubes and batteries supplied as original equipment, the net increase in duty for the-two and throe wheelers will be about 2{ per cent These changes will yield a net revenue of Rs 5 1 crores annually.
93. I come now to proposals for reduction or abolition of excise duties. The first industry to benefit is the handloom. At present only cotton yarn supplied in straight roel hanks is exempt from excise duty It is now proposed to exempt also cotton yarn in cross reel banks up to 20 exempt cotton y am r"f higher counts in cross reel hanks to the extent of 30 paise per kilogram. Further, I propose to extend similar concessions in respect of viscose spun yarn, because the handloom sector is now consuming substantial quantities of that yarn
94. The next beneficiary is the powerloom sector. I propose to exempt it from the existing compounded excise levy This will free about 80,000 powerloom licensees from excise control
95 Handloom and powerloom fabrics have to pay excise duty when they are subjected to various finishing processes, but an exemption is given if bleaching, dyeing and printing is done without the aid of power It is now proposed to extend this concession to all other types of processing, such as stentering and mercerising done without the aid of power.
96 The yarn crimping industry is to-day suffering from excess capacity and the difference m price between crimped yarn and base yarn cannot sustain the present rate of duty It is, therefore, proposed to reduce the duty on crimped yarn from Rs 10 per kilogram to Rs. 5 per kilogram.
97. I propose to reduce the duty on power drive^ pumps used for pumping water from 10 per cent to 3 per cent and to exenrrot power tillers from the general excise levy Both these concessions will be of particular value to small farmers
98, Small paper mills have been passing through difficult times—a few of them have even closed down I therefore, propose to reduce the duty leviable on paper produced by these mills, the relief varying on a graded basis from 75 per cent to 50 per cent of the excise duty leviable, dependent upon the installed capacity of the mill. This concession will be subiect to the use of non-conventional raw materials and waste paper to the extent of at least 30 per cent, Even larger paper mills if they use non-conventional raw materials to the extent of at least 50 per cent will get a duty relief of 33 1/3 per cent of the excise duty leviable This concession is designed to conserve our fast depleting timber resources
99 In the -natch industry, small cottage units are finding it difficult to compete successfully with the bigger units To help such of these units as are members of registered cooperative societies or are certified as such by the Khadi and Village Industries Commission, I propose to double the existing concession of 55 paise for a gross of match boxes I need hardly say that these units have a large employment potential.
100 Mini steel plants are also in difficulties Their position could be improved if they were provided with fresh melting scrap from the main steel plants without payment of excise duty. I, therefore, propose to exempt from excise duty the identifiable types of fiesh melting scrap cleared from the main steel plants as rsw material for the mini steel plants
101, The revenue from electric insulating tapes and slotted angles is low and further, has to be collected from a number of small producers, I, therefore, propose to delete these articles from the list of specific items in the Central Excise Tariff
102. The production of boiled sweets, toffcea, candies, etc has been going down. Sugar, which is a basic raw material, is already subjected to a high excise duty as also are packaging paper and containers used in the confectionery industry. I, therefore, propose to delete these confectionery articles also from the list of specific items in the Central Excise Tariff.
535
103. Electronics is one of out growing d I ld promising Industries anJ oflers great scope for development in the small scale sector. The various concessions that are proposed here are designed to help the firoWth of that sector At present the duty on electronic items Is on d varying basis, some bemt; specific and oiheres ad valorem It it, now proposed to make the basis uniformly ad valorem The large manufacturers producing radios and transistor sets, tape recorders tape recorder-c"w-radios, stereos and hi-ft musical systems will pay duty varying from 15 per cent to 3.r) per cent ad valorem, depending on the item and the exJaeUrv price. It la proposed to give small manufacturers a uniform concession of 15 De- cent ad lalorcm in the rate of duty, that is to say, the corresponding rates of duty thdt they will pay will vary from nil to 2(1 per cent ad valorem.
104 Experience has shown that i judiciously adjusted exci,e structure acts jb a powerful incentive I. manufacturers of electronic goods to re-tut e i.hpli pm 03 We propose to continue with this experiment further. In the case of TV sets the 5 per cent concessional rate of exclse duty will hecneforth be available only where the ex-factory price of a TV set -vith a screen exceeding 36 cent'me tors is Ps. 1600 or less,, instead of the existing limit of Rs 1800 In the case of tape recorders, there wiU be a concessional r"te if the ex-factory price does not exceed Rs, 500. For electronic calculators tou, there will be a concessional rate lor calculators if the ex-factory price does not exceed Rs 175.
105 I shall now expound my propolis concerning rationalisation We are al present collecting excise duty on woollen yarn from a number of small spinners This has led to evasion and other mUpractices It 13, therefore, proposed to rerplac-e the excise duty leviable on woollen yarn by an increase in the customs duty at the stage of import of raw wool, waste wool and rags. As regards wool tops also, with a view to minimising evasion, it is proposed to reduce the present late of excise duty of Rs 10 per kg to Rs 5 per kg and to make good the loss by increasing the import duty on raw wool suitably Both these measures should result in making fabrics using indigenous wool cheaper.
106 Most stee! re-rollers produce bars, rods, angles, etc. which attract an excise duty of Rs 130 per tonne in addition to the duty already paid on ingois It is proposed to shift this duty of Rs 130 per tonne from the re-rollers to the ingot manufacturers, namely, the mam steel plants or the mini steel plants
107 The existing scheme of excise duty on eolton yarn is based on n slab system where Several counts are grouped together, #nd provides for sharp increases in the rates of duty when the* count of yarn increases from one slab to another This duty structure encourages under-apinmng of cotton m order to avoid payment of duty at the higher rate and leads to wasteful use of cotton Evasion too is not easy to check. To remove- these defects, a new schedule of rates has been proposed where the dutv rises gradually with each unit increase In the count of yarn, The new rates include a duty of half a paisa per count to enable Government to recoup the loss incurred by exempting powerloomg and hand processors from the excise duty, to which I have referred earlier As a further measure of rationalisation, viscose spun yarn is proposed to be subjected to the same rates of excise duty as cotton yarn
108. Last year, a system of ad valorem rates for cotton fabrics was introduced The rates were, however, dependent on the count of the yarn uietf In the fabric To rationalise the structure, I produce to adopt the ad valorem system irTesp-rttve of the count of the yarn and with a high degree of progression built into it The new dutv structure has been so devised ai to yield approximately the Same- revenue from cotton fabrics and yarn as is collected
109 As regards the cloth produced by powerlooms, it will be exempt if It is sold (trey or is processed bv hand processors, but if it is processed by independent power-operated processors, the rate of duty will be 50 per cent of the composite yarn and fabric rate puic* by the mill fabrics.
110 A major reform which is proposed to be introduced relates to the no- menclature and classification of textile yarns and fabrics Henceforth, yarn or fabric would ordmanly be c l a s h ed On tho basis of the fibre which predominates bv weight The new1 sysipm will be much simrjlcr and Will removp many Workme rilfflruni*"? Further the blending of polyester fibre up to 'one-sixth of the to ltd fibre rontpnt will not change the classification of the yarn This should enable Ihe textile Industry 1o me more polyester fibre without attracting higher duty on the yarn produced, and would be in furtherance of a multi-fibre policy which the Go^.unment is in the process of evolving
<-,g THE GAZETTE OF INDIA EXTRAORDINARY PAHT 1—SBC- I111 Pursuant to the Government's acceptance of the recommendation of the Sixth Finance Commission, from 1976-77 onwards, auxiliary duties of excise havt. become shareable with the States in the same way as basic duties of excise. Thus, the justification for levying auxiliary duties separately haa now disappeared In order to simplify the structure and to eliminate unnecessary calculations, I have decided to merge the auxiliary duties with the basic duties of excise
112 1 have also carried out a number of minor modifications in the Central Excise Tariff which I do not propose to detail here. Full details of these changes are, of course, given in the Budget documents
113 The total of the additional central excise levies is estimated to yield (Rs. 100 a crores m a year The total conct ssions given will mean a sacri/lce of Rs' IS 7* crores in a year The net yearly Increase in central excise levies is thus estimated at Rs 00 6 crores, However, because of the transfer of the duty on woollen yarn and wool tope to imports, there will be a transfer of Rs. 17 crores from Central Excise head to Customs head, thus giving a net increase of Rs. 73.6 crores under the Centra] Excise heart. Of this, the additional revenue accruing to the Ceniral in a year will be Rs. 53.8 crores, while the States' share will be Rs 19 8 crores
114 Finally I come to customs duties in lespett of which I have to submit only a few proposal's Indigenous production oj watches does not fully satisfy the domestic demand As a result, considerable quantities of foreign watches are known to be smuggled into the country. Government have accordingly decided to make Rood the deficiency still remaining by allowing the import of watches through Hindustan Machine Tools Ltd In order that the indigenously manufactured wHtchcs and imported watches are available to the public at reasonable prices I am reducing the import duty on watch parts and watches from 120 per cent to GO per cent ad J alorem
115 I am proposing also to reduce the import duty on newsprint from 5 per
rent to 21 per cent ad valorem
116 I would now mnke certain proposals designed to stimulate industrial growth and to enhance the competitiveness of our industry In order to introduce a mea- sure of competition, It is proposed to allow the import of certain selected Hems of caoftal Hoods without prior scrutiny from the indifienouB angle At the same time, n o r d e f to enable the Indian capital goods industry to meet foreign competition more effectively I propose to bring down the rate of import duty on copper wire ws used for the manufacture of certain larger sized electrical motors, generator, nml transformers from the existing level of 4S per cent plus Rs fi,600 per tonne to 4n r i r e ni Sd valorem Similarly the rate of duty on cold rolled non-grain-oriented tLetl T l t w s t ol tool steel special steel, and high carbon steel is also P"posed sheets, aiiow sie^, u u *• c e nt F u r l he stainless steel plates
h * and sric^ of Ifigauge and thicker which are used in the manufacture of sheets and Strip of^lh gauge a u() p er c e nt Qr 32{, p er c e nt july
mMsft^B^ "3 55*52:
of Ihe orde? o fV 30 25 crores at the existing level of imports.
117 The effect of the ™ P ^ V ? £? ^ X T t Sa V ?7 ^ £ add^tinr.al revenue of Rs 15 5 cro™^m a ye ^ l n to a f,c c m nt a year thus rosulimp m a net reduction ot Rs -S ^ tQ ^ ^ h d> IS S S S r X? of the"udgetToSal, on Customs revenue will be a reduction of RE 5 2 crores In a year
Inflationei ? effect
537
CONCLUSION
120. With this I have come to the end of my labours. My aim in this budget is to stimulate the economy into achieving a higher rate of growth oi output and employment, and simultaneously to ensure that the fruits of economic progress are as widespread as possible. The emphasis on investment in agriculture small and village industries and rural infrastructure is designed to achieve these' objectives. My tax proposals seek to enlarge the pool of national savings while strengthening the role of taxation in reducing disparities of income and wealth. I have taken special care to widen opportunities for the small man—be he a farmer, an artisan or a technocrat. It would be futile to pretend that we can achieve at one stroke the full utilization of the latent energies represented by our vast human resources But a beginning has to be made 1 venture to think that this Budget marks such a beginning,
121. My party has emphasised liberty. But liberty does not mean freedom to starve and freedom to feel unwanted. Large-scale poverty and unemployment degrade those who have to suffer them, and debase those who tolerate them. We owe it to ourselves to see that these twin scourges are eradicated as quickly as possible. We have a long and a difficult road ahead of us. But there can be no doubt about our commitment to our goals and ideals. I believe we are on the right course, and this Budget represents the first step, however small, in that direction.
PR1NT"1I BY THE GENERAL MANAGER, OOVEBmONT OF INDIA PRESS, MINTO ROAD,
NEW DELHI AND PUBLISHED BY THE COKTBOLUEK OF PUBLICATIONS, DELHI, 1 9 77
- "^ will i-nrrense bv about ii rifr cent generally, '.vhlle that on thn cheaner items llkp b]i'Vs snrl r)rv d i ^ m ^ er V ^ rem nn mor^ or less unchanged These changes are estimated to yield Es 4 8 cror^s m a vear ↩