Corporate India saw Finance Minister P Chidambaram's farmer-friendly national budget on Friday as a signal that elections are close and fumed that he had done little to boost industry.
Chidambaram unveiled a debt relief package for farmers of 600 billion rupees (15.05 billion dollars) and offered tax exemptions for individuals.
But he left corporate tax rates unchanged in the budget for the new fiscal year.
The debt waiver and other measures targeted at farmers gave the minister no leeway to reduce company taxes, said V Balakrishnan, chief financial officer at Infosys Technologies, India's second-largest software maker.
"He has taken measures to boost growth in an election-year budget," said Balakrishnan, who saw the fiscal package for the year starting April 1 as an indicator of a national election coming sooner than the due date of May 2009.
India's flagship software industry had demanded an extension of a tax holiday that ends next year as an appreciating rupee dents its dollar-billed sales and a recession looms in the United States, its biggest market.
"We are disappointed that some breathing space has not been offered, especially to small software firms that are facing the macroeconomic challenge of what is happening in the US," said Balakrishnan.
Some 30 million indebted farmers' loans would be fully waived and another 10 million would receive aid, said the finance minister, whose budget also preceded nine state elections scheduled for this year.
"It looks like a totally pre-election budget," N Reghuraj, who heads the Karnataka state chapter of the Confederation of Indian Industry, said in this southern Indian city.
Chidambaram, while offering debt relief to farmers, had done little to boost agriculture, said S Viswanathan, managing director of John Fowler (India), which makes filters that go into cars, commercial vehicles and tractors.
The magnitude of the giveaway is such that it exceeds the 12.7 billion dollars in foreign investment that came to the country last year, he said.
"For industry there have been few concessions, no significant impact," Viswanathan added. "It is an opportunity lost for the economy to increase growth from 8.7 per cent to double digits."
The farm sector is key as it provides a living for two-thirds of India's 1.1 billion population.
The Congress party-led coalition came to power in 2004 on the plank of improving the lives of farmers, who make up an influential voting block but were seen as not receiving their share of the dividend from a growing economy.
"The politics of economics are at play" in the budget, Uday Kotak, managing director of Kotak Mahindra Bank, told the CNBC TV-18 business news channel.
Farm growth is forecast to slow to 2.6 per cent this fiscal year from 3.8 per cent the previous year, raising alarm about India's ability to continue to feed itself. That compares with 10.7 per cent growth in services and 9.7 per cent in manufacturing.
"The budget was as expected, populist in nature," said DK Joshi, economist at the credit rating company Crisil. "I am slightly concerned about the debt waiver scheme as it is unclear at the moment whether banks would be paid back any amount by the government."
Shares of state-owned banks fell after Chidambaram announced the debt waiver.
"The long-term effects of the budget seem to be a total disappointment," said Anil Mittal, head of Parenteral Drugs India, speaking for the pharmaceutical industry.
The budget "provides nothing for support to industry or development in the long run," he said.
The finance minister had been expected to lower fees, taxes and duties on the telecom sector, said market-research firm Frost and Sullivan.
"But this was not even touched upon by the minister in his budget," it said, adding that for the information-technology and telecoms industries "it was a lacklustre budget."