Press Release
Response To The Union Budget 2004
From Indian School Of Business (ISB), Hyderabad

Hyderabad, July 8, 2004: Expressing his opinion on the Budget, Professor M. R. Rao, Dean, Indian School of Business said, "The Budget overall was much as predicted. The FM has announced several excellent projects for the rural poor. There is clearly a shift towards protecting people rather than giving price subsidies. This is very good as it helps us stay away from the 'distortion' effect. Ultimately, the success of these projects will depend on their implementation."

"What specially interested us was the FM's approach to the Special Economic Zone. We have been having several in depth discussions about this at ISB with faculty and industry experts. As a country, we need to understand how to set up the SEZ's and have a lot to learn from China, UAE and others. We need to have the infrastructure, legal institutions, labour laws and other incentives that will be conducive to improving productivity and growth of exports. The suggestion for a uniform regulatory body is a good step in this direction."

The Finance Club * at the ISB today analysed and discussed the Union Budget 2004. This was led by Professor Bhagwan Choudhry **. Attached are the views and responses: -

Budget 2004

Today's budget appears to be a 'safe budget', with the FM trying to appease all parties to the UPA. Does it actually look like 'India is Shining'?

As expected, there were sops for the agricultural and the farm sector. However, the budget speech remained silent on labour reforms, power sector reforms and urban reforms.

Budget realism:
Though, this budget carries forward the process of fiscal consolidation, it is not clear how it will meet its deficit targets. For instance, the budget estimate for tax revenues seems optimistic, particularly, the estimate for customs and excise revenues given the reduction in peak tariffs announced in January 2004. To elaborate on this, note that excise collection has shown an average growth rate of 11.3% p.a. in the 8 years from 1994-95 to 2002-03 and 12.2% last year; however, this year, it is budgeted to grow by 18.2%. The same can be seen in case of customs duties which have grown by 7.7% in the same 8 year period and 10% last year, but are budgeted to continue growing at 9.9% despite the reduction in the rates in a large number of sectors.

* Finance Club, Class of 2005: Hardik Dalal, Harsh Khandelwal, Mangesh Anaokar, Priya Mathur, Ramanjaneya Sharaph.
** Prof. Bhagwan Chowdhry is a Professor and Co-Area Leader of Finance at the Indian School of Business (ISB). He teaches Corporate Finance and Finance Strategies to both the Post Graduate Program students and Executive participants. He is currently on sabbatical leave from the University of California, Los Angeles, Anderson School of Management where he is a Professor of Finance and Economics and the Director of Centre for International Business Education and Research. He welcomes comments at bhagwan_chowdhry@isb.edu

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Contributed by -
Ms. Bhuvana Ramalingam,
Director - Communications,
Indian School of Business, Hyderabad.