Editorial

A GROWTH - ORIENTED AND CARING BUDGET

Budget 2004-05 brings back to the centre stage the three economists most responsible for turning around India’s economy and setting it on the path of steady growth. This refers to Prime Minister, Dr. Manmohan Singh, his Finance Minister, Shri P. Chidambram and Shri Montek Singh Alhuwalia, the recently appointed Deputy Chairman of the Planning Commission. This is coupled with the unstinting support being provided by Smt. Sonia Gandhi, the Leader of the ruling Congress Party. It is therefore quite natural that the benefit of their experience has given the country a well-crafted, growth-oriented budget with a human face.

This budget has tried to balance the needs of economic growth and the necessity to continue with reform-oriented measures while augmenting social sector development and welfare measures. The budget has incorporated the agenda specified in the Common Minimum Programme. Its chief focus is on the agricultural sector. More credit for farmers - Rs. 2,800 crore - for irrigation and extra funds for infrastructure development, especially rural roads, are all measures designed to remove impediments to agricultural development. Horticulture and agro-business will also receive a fillip, leading to income generating avenues in rural areas. The Prime-Minister’s call to learn from China’s rural reforms has been incorporated with this focus on rural and small town development. The budget by allocating additional funds and by evolving new policy measures to revitalize rural industry and infrastructure is fulfilling a serious lacunae in India’s economic development. Special focus has been placed on irrigation schemes and for rain water harvesting. The issue of farmer indebtedness has also been looked into.

The Budget places emphasis on the poorer sections of society and an additional Rs. 10,000 crore has been sanctioned for poverty and unemployment programmes. Education, especially primary education, in rural areas has also received a boost with the imposition of an education cess of two percent which is expected to yield Rs. 5000 crores. Apart from addressing the concerns of youth, the budget also provides relief for senior citizens by initiating a 9% interest scheme. A new health insurance scheme for the poor has also been initiated. Additionally, an Employment Guarantee scheme for one member of each poor family has been initiated and till the scheme comes into effect, food for work programmes will be launched in 150 of the most backward districts. The Budget also comes up with some innovative new schemes such as the Rs. 25,000 crore Backward States Grant Fund from April 2005. Coupled with a cut in interest rates on central loans to states, it has provided a measure of relief to cash strapped states.

While not straying too far from the CMP, Budget 2004-05 has continued economic reforms by raising limits on FDI in the telecom, insurance and aviation sectors. It also proposes a board for the reconstruction of public sector enterprises. Relief has also been provided to the textile industry to turn it into a competitive sector. An Investment Commission has also been proposed. Its task will be to solicit and encourage both domestic and foreign investment. Industry has reacted favourably to these moves and the fact that freight rates have not been hiked in the rail budget augurs well for industrial growth.

Finally the budget is reflective of the CMP agenda. This is to ensure that economic growth targets and free trade does not leave behind large segments of society. The fruits of economic growth have to be equitably distributed and issues of human development that remain despite fifty years of planning, have to be addressed on a war-footing. The focus on education and health for the poorer sections of society are certainly designed to give them a stake in the reform process. India is a large and diverse country and it is not easy to manage the needs of every region or section of society. Yet Budget 2004 has managed precisely that. It brings back to economic reform a humanist ideology. It also brings to governance years of experience. Those who feared an anti-reform budget driven by an orthodox Marxist agenda are forced to reckon with the fact that economic reform can go hand in hand with social and infrastructure development.