The Hindu Business Line : Human face, yes, but whither reforms?

However, the Finance Minister has undertaken a few initiatives for development of rural infrastructure. The new vehicle, Bharat Nirman, for rural India, should be used to provide better infrastructure at a faster pace.

The need of the hour is to monitor whether the money earmarked is really spent on the intended use. The setting up of a special purpose vehicle for infrastructure projects is welcome. But Rs 10,000 crore per annum falls much short of expectations, looking at the huge need for infrastructure in the economy.

The National Highway Development Project III which will target 4,000 km of selected high density highways not covered earlier is a welcome step, and the proposal to connect very village with a population of over 1,000 will lead to better connectivity.

The idea of floating a SPV that will offer debt directly to infrastructure projects will help speed up financial closure of such projects. Permitting the use of foreign exchange reserves for importing capital goods for infrastructure projects is also a good step.

Considering the interest rates in the global market and interest of the foreign investors in Indian papers, the government could have considered a sovereign backed debt issue with a 10-15 year tenure that would have directly funded infrastructure projects. One of the interesting highlights of the Budget is the Rs 1,500-crore viability gap fund. Though details of how this fund will work are not known, if operated prudently it can speed up a number of languishing infrastructure projects.

Rationalisation of corporate tax rate and permitting credit for MAT are steps in right direction. Introduction of VAT is definitely a step in right direction and hopefully it will be implemented from April 1, 2005.

A number of measures announced in the Budget for the debt market and specifically towards securitisation of corporate and mortgaged debts will help impart depth and liquidity to the corporate debt market.

Removal of upper and lower bands for SLR and CRR requirements and permission to banks to raise preference capital will not only make banks' balance-sheets healthier but will also impart further liquidity to banks for funding the growing economy. The proposal to allow mutual funds to launch schemes that invest in gold will induce investors to monetise their savings and convert a dead asset into a yielding one.

The Finance Minister should have also similarly allowed mutual funds to float funds to invest in real-estate which would have gone a long way in helping people to buy their own homes over a period of time at an affordable price.

Coming specifically to the cement industry the decision to increase excise on clinker to Rs 350 per tonne should have been accompanied by decision to reduce excise on cement to Rs 350 per tonne.

Moreover, when complete tax rationalisation is being carried out by way of tax reform, it is very surprising that cement, which is akin to infrastructure, still remains a very highly taxed commodity, at a rate higher than even the maximum slab of excise duty.

(The author is Director, Gujarat Ambuja.)

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