Major Economic reforms in 2000-01

Industry

• Strong thrust to knowledge based industry by reducing customs duty on several items of IT, telecom and knowledge-based industries.

• Foreign direct investment permitted through automatic route in all industries except for a small negative list.

• Non-banking financial companies allowed to holding companies. Their subsidiaries, which are the operating companies, also allowed to hold foreign equity upto 75%.

• Deservation of the garment sector from the purview of SSI reservation.

Infrastructure

• Securitisation of dues of central sector power and coal utilities for assisting the SEBs in clearing dues.

• Domestic long distance service opened up without any restriction on the number of operators.

• Corporatisation of Department of Telecom Services (DTS) and Department of Telecom Operations (DTO) by creating Bharat Sanchar Nigam Limited (BSNL) w.e.f. October 1, 2000.

• Revenue sharing regime, in place of existing fixed license fee, introduced for both basic and cellular service operators.

• Thrust to accelerated implementation of Prime Minister’s National Highways Development Project (NHDP) from petrol and diesel cess and additional fund raising measures for NHAI.

• Diversment of Government equity proposed in Indian Airlines and Air India.

• Extension of tax holiday benefit to solid waste management and water treatment for developing urban infrastructure.s

Direct taxes

• Non-agricultural income of farmhouses made taxable.

• Venture Capital Funds accorded complete pass through status with the income being taxed only in the hand of investors.

• Interest from bonds issued by local authorities, as specified by Central Government, made tax free to make funds available for infrastructure.

• Minimum Alternate Tax (MAT) to be charged at 7.5 per cent of the “book profits” by all companies as determined under the Companies Act instead of the effective rate of 10.5 per cent earlier.

• Tax holiday benefits liberalized in respect of newly established industrial undertakings in Free Trade Zones, Software Technology, Parks, Electronic Hardware, Technology Parks and 100 per cent Export Oriented Undertakings.

• Weighted deduction for expenditure incurred on scientific research on in-house research and development facility enhanced from 125 to 150 per cent.

• Benefit of exemption of export income by entertainment industry extended to non-corporate assesses.

• One-by-six criteria, introduced in the Union Budget 1998-99, for identifying potential taxpayers, extended to 79 more cities (from 54 cities) having population of 2 lakh or more.

Indirect taxes

• Peak protective customs tariff rate reduced from 40 per cent to 35 per cent ad valorem.

• The existing five major ad valorem rates of basic customs duty reduced to four ad valorem rates.

• The system of central excise was overhauled with the introduction of a single Central Value Added Tax (CENVAT) of 16 per cent ad valorem on all manufactured goods with a few exceptions.

Fiscal management

• The Fiscal Responsibility and Budget Management Bill 2000, was introduced in the Lok Sabha in December 2000. The proposed legislation provides for a legal and institutional framework to eliminate revenue deficit, bring down the fiscal deficit and stabilize debt as a proportion of GDP within a time frame.

• The interest rate on general provident funds reduced by 1 per cent to 11 per cent with effect from April 1, 2000.

• Several measures taken for controlling growth in non-plan, non developmental expenditure.

Financial sector

• Tightening of entry norms for IPOs through modifications to SBI (Disclosure and Investor Protection) guidelines.

• Modified guidelines issued for 100 per cent one-stage book building process.

• Legislation initiated for reducing minimum Government shareholding in nationalized banks to 33 per cent.

• Establishment of IRDA.

• Enlargement of functional area and greater autonomy to NABARD through amendment to the NABARD Act, 1981.

• Revised norms for entry of new banks in private sector.

• Permission to banks and NBFCs for undertaking insurance business.

Trade policy

• Setting up of Special Economic Zones (SEZ) to encourage export production.

• Evolution of a scheme for granting assistance to stages based on their export performance for development of export related infrastructure.

• Permission to import second hand capital goods, less than 10 years old without obtaining any license on surrender of SIL.

Capital account

• Foreign Direct Investment (FDI) upto 100 per cent permitted in e-commerce, subject to specific conditions.

• The dividend balancing condition for FDI in twenty-two consumer goods industries removed.

• The existing upper limit of Rs. 1500 crore for FDI in projects involving electricity generation, transmission and distribution (other than atomic reactor plants) dispensed with.

• FDI under the automatic route permitted upto 100 per cent for all manufacturing activities in Special Economic zones (SEZs), except certain activities.

• Foreign equity participation upto 26 per cent in insurance sector allowed under the automatic route.

• Policy liberlisations effected for facilitating the us of ECB as a window for resource mobilization.

• Policies pertaining to international offerings through ADR/GDR by Indian Companies further liberalized.

* Includes pulp and waste paper, newsprint, paperboards & manufactures and printed books, newspapers and journals etc.

* Weights have been worked out on the basis of share of value in 2001-01 (April-October)

Source : DGCI&S, Calcutta

*Provisional

Quantity: Thousand Tonne
Value:Rs.Crore & US $ Million