Published by the Forum of Free Enterprise, a non-political organization founded in 1956 by AD Shroff, the text titled “Union Budget 1993-94: Laying The Foundations For An Economic Miracle” was delivered as a speech by HP Ranina at a public meeting in Bombay on 1st March 1993.

HP Ranina was a well-known tax expert and lawyer based in India. He founded H.P. Ranina & Co., a Mumbai-based law firm specializing in taxation and corporate law.

Ranina was known for his extensive knowledge and expertise in tax law, and he was often sought after by businesses and individuals for his advice and guidance. He was also a prolific writer and speaker on tax-related topics, with articles and insights widely respected in the Indian business community.

You can read the original, unabridged version here.

This year’s Budget will go down in the fiscal history of India as the one which will create the right environment for engineering an economic miracle that has, so far, eluded the country.

India is indeed fortunate to have one of its most distinguished and internationally respected economists, Dr Manmohan Singh presents his third successive Budget within twenty months. Certainly, Dr Singh has performed a miraculous feat of cutting indirect taxes by Rs. 4,522 crores, increasing developmental plan expenditure, and at the same time, reducing the budgetary deficit to Rs. 4,314 crores, which is the lowest ever in the fiscal history of India.

The greatest merit of the budget proposals is that the Finance Minister has, with single-minded devotion, attempted to revive the recession-ridden industrial sector. The cutting of excise and customs duties, resulting in a loss of revenue of almost Rs. 4,500 crores, will galvanize industry because the cut will enable industrial units to achieve two objectives:

1. Compensate them for the increase in costs; and
2. Pass on the part of the reliefs to the consumers, which would create a new wave of demand, reversing the recessionary trend.

The government has put the economy in high gear and sought to achieve the following objectives after having gotten over the critical period of the last one and a half years successfully:

• Globalization of the Indian economy by making the Indian industry truly competitive;
• Strengthening the fundamentals of the corporate sector in India by reducing excise duties and customs duty across the board, reducing the interest rate, and making more credit available through a reduction in the CRR and SLR ratios on deposits with banks;
• Creating an environment for a new consumer boom, which will also help the growing middle class;
• Giving a boost to exports by removing the indirect tax imposed as a result of the dual exchange rate; exports slated to register a growth rate of 9% in dollar terms;
• Infusing the right amount of funds in the rural and agricultural sectors would also increase the purchasing power in the hands of the rural masses, leading to greater demand for consumer durables.

…The Finance Minister has emphasized the development of the agricultural sector. The farm output will be at an all-time high of about 190 million tonnes. Coupled with this increase, the higher procurement prices will result in greater purchasing power in the hands of the rural masses. Thus, the demand-oriented boom will revive industrial fortunes and set the consumer goods industry on unprecedented growth. The consumer goods industry, which is labour intensive, will also generate greater employment opportunities, again generating more funds in the hands of the people to fulfil their need for consumer goods.

The Indian agricultural sector will significantly benefit from the Government’s strategy of reducing the high levels of protection given to Indian industry. The more competitive exchange rate, which has been brought about, will also boost exports of agricultural commodities and agro-based products, again leading to greater resources in the hands of the rural masses…

As enunciated by the Finance Minister in his first Budget introduced in July 1991, the new policy towards foreign investment has led to the globalization of the Indian economy. While our neighbouring country China attracts around US$ 40 billion of foreign investment annually, India’s record in this regard has been dismal over the past decade, as we have attracted no more than US$ 300 million annually. During 1992-93, about US$ 2.3 billion in investment proposals were approved, but the funds have yet to flow into the country.

In this context, the announcement made by the Finance Minister in Paragraph 28 of his Budget Speech is indeed heartening. He has mentioned that the Government has signed the MIGA Convention, whereby investments made by foreign countries will be guaranteed so that foreign investors have the requisite security, especially regarding their repatriation rights.

Once India becomes a member of the Multilateral Investment Guarantee Agency, separate bilateral investment treaties will be signed by India with several countries, including the United States of America, Germany, and the United Kingdom. This will ensure a substantial flow of investible resources into India, and by 1996-97, India should be assured of a flow of at least US$ 10 billion per annum.

Foreign investment will, in its wake, bring about the upgradation of the technical base of India as well as new disciplines, apart from generating employment opportunities for the millions of unemployed and contributing an immense amount of revenue to the Exchequer.

The Finance Minister has been wise enough to realize that industrial modernization, and especially the creation of internationally competitive industries, requires a massive expansion of and qualitative improvement in infrastructure. This is especially true of power generation, telecommunications, and roads.

Traditionally, these areas have been the preserve of the public sector. Substantial expansion of public investment in these areas is undoubtedly necessary. However, the country’s needs are far beyond the capacity of the public sector to deliver in a reasonable time frame.

The Government has, therefore, adopted a policy of encouraging private sector involvement and participation in these areas to supplement the efforts made by the public sector. Changing these sectors’ policies, procedures, and regulatory frameworks will be necessary to attract such investment…

…To sum up, the budget proposals for 1993-94 will put the economy on the fast lane to industrial recovery and growth. A new phase of consumer boom is on the anvil, leading to a demand-oriented recovery. Exports are also set to record an increase in Dollar terms which will improve the balance of payments situation and put the Indian economy in a better position to reduce its dependence on external borrowing. Undoubtedly, the last three Budgets of Dr Manmohan Singh have embarked on the exciting task of economic rejuvenation. Industrial and social development have been given top priority and have been put back on the national agenda.

India should now play a significant role in the global economic scene. A vibrant and rapidly expanding economy is accelerating its pace to achieve a growth rate of 9% per annum beginning from 1995. This would ensure that the per capita national income will increase before this century is out from US$ 350 to well over US$ 1,000. A sizeable number of people will emerge from the grinding poverty they are in today.

Then, the people will look back and consider the twenty-month tenure of Dr Manmohan Singh’s Finance Ministership as constituting the turning point in India’s economic history.

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