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Survival and not Profiteering: The Rationale Behind Retention of Budgetary Benefits

The retention, by Indian industry, of the benefits granted to it, in the 1993 Union Budget, has, once again, attracted attention. The Union Civil Supplies Minister has recently asserted that the Government would be forced to withdraw the budgetary concessions if the industry failed to live up to its expectations. ( The Economic Times, 8.6.93, p 1)Assocham, the apex body representing industry interests, on the other hand, asserts that the Indian industry has passed on the benefits to the consumer.This phenomenon of disagreement over whether the industry is, in fact, passing on the duty benefits or not ( including the degree thereof) is not new. It has been the story for years now. One could dismiss this issue, as one did in the past, as mere rhetoric. However, this time, it is necessary to go beyond. This is due to the fundamental- changes that have taken place in the Indian economy during the past 24 months. Especially the dismantling of protection from international competition that was hitherto being provided to Indian industry.The key factor that would influence the strategic response of top managements of enterprise in today's environment is their outlook for the future. This can be dichotomized into their assessment of the future for their line(s) of business, including their assessment of their ability to acquire competitive capability,( Competitiveness Assessment) and their assessment of their ability to continue to exercise control over the enterprise. (Threat to Ownership/Control)The latter has particularly assumed great significance in the new environment. The behavior of both Indian businesses and the transnational corporations since the adoption of a new economic strategy leads one to believe that perhaps Indian businesses are none too confident about surviving the future - independently.This paper constructs multiple scenarios confronting Indian businesses and argues that in all the conceivable scenarios that Indian businesses confront, rational behavior dictates retention of duty concessions granted in the 1993 Union budget.