Finance Minister Yashwant Sinha protests too much. "I am not the Finance Minister for the Bombay Stock Exchange," he is reported to have declared in his reply to the debate on the Finance Bill for 2000-01. That remark was just a bald response to accusations that economic policy in India, whether formulated by the Finance Ministry or the central bank, is increasingly shaped by the demands of Finance and the movements of the Sensex.
 
Unfortunately, Yashwant Sinha's actions do not match his rhetoric. Consider the modifications to the original Budget proposals he has turned down and those he has made. The Opposition and the Bharatiya Janata Party's allies have been demanding a reduction or withdrawal of a spate of increases in administered prices - of kerosene, liquefied petroleum gas (LPG), fertilizers and food materials issued through the public distribution system (PDS) - announced prior to and in the Budget. Their demands, especially in the case of food, have acquired significance in the wake of reports of pockets of severe drought in the country and predictions that after a gap of 12 years the country is likely to experience a bad monsoon in the year starting June.
 
Put together, these actual and likely developments provide a case for preparatios for using the large foodstocks with the government for food-for-work programmes as well as for provision at subsidised prices for those who may be priced out of the open market by food price inflation in the coming months. Both of these would involve an increase in the explicit or implicit subsidy bill of the government. In such a situation the argument that food policy should be driven by the objective of sharply reducing food subsidies is not merely faulty in itself, as many have argued, but comple tely unwarranted from a welfare point of view.
 
That the government too is unconvinced of its position should be clear from the decision to offer an additional allocation of 20 kg of foodgrain per capita to the drought-affected States, which would be sold at below poverty line (BPL) rates even to those above the poverty line. However, the demand to reduce the huge hike in the BPL rates has been ignored.
 
The combination of fiscal and monetary policies that are being put in place appear to have been formulated with one eye on the market. What is appalling, however, is that while Yashwant Sinha is counting the government's paise when it comes to safeguarding the interests of the millions who, even official statistics show, are either below or at the margin of subsistence, he has been quit e happy appeasing the well-to-do by forgoing revenues from direct taxes.
 
There are at least three modifications motivated by this concern of his. First, a lower surcharge on income tax in the case of those whose taxes are deducted at source, and higher exemption ceilings on interest on housing loans and investments in infrastructure bonds for all income tax payers. Second, a graded tax holiday for export-oriented units, including those providing Information Technology-enabled services, provided at a time when even many within the government have been arguing for a tax on the huge export incomes earned by units supported in various forms with largesse from the state. Third, exemption from income taxes of stocks awarded to employees under the employees' stock option plans (ESOPs), on the grounds that the revenues generated from the sale of these stocks, as and when they are sold, would be subject to capital gains tax.