The much-awaited National General Budget was presented on the desk of the Parliament by United Progressive Alliance’s Finance Minister Mr. P. Chidambaram. As ever, it left many people smiling but left the others drowning in sorrow. Being the last Budget of the present coalition government, it was under tremendous pressure due to the upcoming general elections and the Left parties. Hence, it came out to be a socialist budget, as was mostly expected, with little relief for finance and economy.
The Gross Domestic Product increased by 7.5 per cent, 9.4 per cent and 9.6 percent in first three years of the United Progressive Alliance Government’s rule, resulting in an unprecedented average growth rate of 8.8 per cent. The drivers of growth continue to be ‘services’ and ‘manufacturing’, which are estimated to grow at 10.7 per cent and 9.4 per cent respectively.
What remained the cause of concern was the sluggish growth rate of agriculture, which was 2.6 per cent for 2007-08. Apart from the growth rate, there was a general spurt in food grains in 2007-08, estimated at 219.32 million tones – an all time record. For better growth rate of this important sector, Rashtriya Krishi Vikas Yojana, with an outlay of Rs.25,000 crore, and National Food Security Mission, with an outlay of Rs.4,882 crore, was launched under National Policy for Farmers in the Eleventh Five Year Plan.
Apart from rations, this Budget was by and large dedicated to the fairer half of the country with Rs.11,460 crore being provided for 100% women specific programs and Rs.16,202 crore for schemes where at least 30 per cent allocation is for women specified programs. Also, the threshold limit of assessment of income free from income tax has been waived from earlier Rs.150,000 to Rs.180,000. To improve the health and security of Indian women, Life Insurance Corporation of India (LIC) is being asked to scale up Janashree Bima Yojana scheme to cover all women self-help groups that are credit-linked to the banks and Rs 500 crores are proposed to be contributed to the corpus of the Social Security Fund.
Much emphasis has been laid to improve the financial and social position of farmers of India, which presently is way below their counterparts in other agrarian economies. To enhance availability of resources, the Government proposed to continue providing fertilizers to farmers at subsidized prices. Schemes were launched to exempt, or to settle, all loans on farmers disbursed by scheduled commercial banks, regional rural banks and cooperative credit institutions. Implementation of the debt waiver and debt relief scheme is to be completed by June 30, 2008 and the farmers availing the relief would be entitled to fresh agricultural loans from banks in accordance with normal rules. About three crore small and marginal farmers and about one crore other farmers are expected to be benefited from the scheme.
Taking the financial grounds, the Budget revealed, that in India even now the saving rate is greater than investment rate, though the difference has lowered to 0.3 per cent. India’s strength remained the manufacturing sector and growth in capital goods is still very high at 20.2 per cent. The Finance Minister pointed the need to take manufacturing growth rate to double digit through more reforms. It is a well-known fact that India is a highly power-deficit country. Hence, the sluggish growth rate in the power sector made it difficult to improve the infrastructural reforms. Therefore, more and more Ultra Mega Power Projects (UMPP) have been proposed, out of which at least ten are to be launched this year. In addition, a National Fund has been formed for transmission and distribution reform and is allocated Rs.800 crore for the next year. The performance of National Highway Development Program (NHDP) was highly acclaimed and fresh money is proposed to be dedicated to it. More money is to be put in the Golden Quadrilateral that connects the four metros, East West Corridor and the North Eastern region projects.
Need of new policy for minerals was given voice in the budget and seventh round bids are to be invited under the New Exploration Licensing Policy for 57 exploration blocks. It is estimated to attract investment of the order of US$3.5 billion to US$8 billion for exploration and discovery. Also, the new Coal Distribution Policy was announced and a coal regulator is proposed to be appointed to regulate the proper use of the highly valued natural resources.
Care to important export oriented sectors such as Information Technology (IT) and textile has also been provided. Allocation of funds to the Department of Information Technology will be enhanced. Two Schemes for establishing 100,000 broadband internet-enabled Common Service Centers in rural areas and State Wide Area Networks (SWAN) with Central assistance were proposed. New scheme for State Data Centers was also approved. Schemes working for Integrated Textile Parks (SITP) and the Technology Upgradation Fund (TUF) are to be continued in the Eleventh Plan period. Furthermore, a risk capital fund is to be created in the Small Industries and Development Bank of India (SIDBI). Also, a passive indirect support is to be provided through Market Stabilization Bonds (MSS), which is, in a sense, a subsidy to the export sector.
A special provision was made to enhance India’s soft power. For this, a special grant was given to the Indian Council of Cultural Relations to design and implement a program in order to achieve the objective of projecting the ‘soft power’ of India in music, literature, dance, art, cuisine and especially films.
As has been the trend for years, markets responded negatively to the proposed budget and the Sensex turned more and more negative with every word of the Finance Minister. Different economists have given different views over the budget and same is the case with the Confederation of Indian Industry, Federation of Indian Chambers of Commerce and Industry and Associated Chambers of Commerce and Industry of India. However, this Budget can be certainly appreciated for three things – the sixth pay commission, agricultural reforms and women upliftment. It seems that the Indian growth story is there to last for years ahead even with lesser reforms. At least, that is what Mr. Finance Minister thinks!
[image by : http://www.flickr.com/photos/keerthi/1464044156/]