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May 5, 2000

 

NEW DELHI, MAY 4 (AP) - Prime Minister Atal Bihari Vajpayee's government refused to backtrack on unpopular cuts in subsidies for food and fertilizer on Thursday as the lower house of Parliament approved the 2000-2001 federal budget.

     

An angry opposition walked out of the house after heckling Finance Minister Yashwant Sinha when he refused to roll back the cuts, which affected farmers and most middle-class and poor

consumers.

 

The dlrs 77.8 billion budget will now be considered by the upper house of Parliament, a formality since it cannot make any changes in the financial allocations.

     

 

     

The budget raised the defense spending by dlrs 3 billion to dlrs 13.5 billion, the largest increase in any single year.

     

India plans to buy Advanced Trainer Jets, Russian main battle T-90 tanks, the Airborne Warning and Control System (AWACS), High Altitude Unmanned Aerial Vehicle, midair flight refueling aircraft and additional French Mirage 2000 aircraft.

     

The unprecedented rise came after severe fighting between government soldiers and Pakistani-based forces last summer in the Kargil sector of Kashmir in which more than 1,000 people were killed.

     

Sinha said in his speech that he had set up an Expenditure Commission to review government subsidies that consume 14 percent of the country's Gross Domestic Product.

     

"I have asked the commission to give me a quick report on food and fertilizer subsidies," the finance minister said.

    

That mollified the allies of Vajpayee's right-wing government and they approved the budget in a voice vote with opposition benches empty.

     

Sinha's budget included a 12 percent cut in the subsidy on some foods and a 4.5 percent cut in fertilizer subsidies.

    

Vajpayee's allies and the opposition parties argued that lowering of subsidies had increased the burden on India's poor, whose per capita income averages less than dlrs 430 a year.

     

In the budget, the finance minister provided incentives to knowledge-based industries by making it easier for Indian companies to spend capital on foreign businesses and technology and allow more foreign investment in Indian firms.

     

He slashed the customs duty on computers and parts from 25 percent to 15 percent and on mobile phones from 25 percent to 5 percent.

     

On Wednesday, he announced a 10-year tax holiday for software exports.

     

India's economy grew by 5.9 percent in the past year. Sinha's major worry is the fiscal deficit of 5.6 percent of the Gross Domestic Product in the budget for the past year, considerably

higher than his target of 5.1 percent.

     

India's fiscal year runs from April 1-March 3.  

 


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