Budget 2008-09 – ‘A new trail of inclusive growth’

Obviously it is not surprising, if many of us conclude that government’s intention is to capitalize the huge vote banks constituted by the rural population of poor farmers and the general public at large, not forgetting minority communities and more specifically the women of our country. Will a government who had primarily initiated the present reforms, think of sanctioning expenditures that appears to be the biggest capital drain, without genuine reasons and planning proper measures? It is a matter; all of us should probe into.

It is quiet evident that unlike the previous years, the government has taken a different course altogether in the budget 2008-09, by providing substantial relief to the poor farmers with their loan weavers, and comforting the common public with the rise of income slabs for tax consideration, apart from reducing the income tax rates and excise duties on most of the consumer items along with other relief measures. Package for farmers, in terms of loan weaver, is a good step forward to encourage revival of agricultural production, which complies with the Common Minimum Programme proposed by UPA government in 2004. The public sector banks would benefit by the liquidity they would enjoy on the blocked funds that resulted by unpaid loans

In the developed nations, the prime feature for stability of their economy is their self reliance in terms of food resources. A nation becomes self reliant only by establishing a strong agricultural base, as food is the basic necessity. Indian agricultural sector is static and underproductive more so because of the social divisions based on the caste system that details the power equations. Considering these facts; if one analyzes the present budget, it is aimed to strengthen agricultural base. Following are the measures proposed in this regards.

• Rs. 60,000-cr package for farmers

• National Horticulture Mission to get Rs. 1,100 crore

• National Agriculture Insurance scheme get Rs. 640 crore

• Tea Research Association gets Rs. 20 crore

• NREGS outlay at Rs. 16,000 crore

Progress of a nation depends on its productivity and high empowerment of its human resource, for which Education, Health and Employment are the prime areas to be developed. Though India has got a large population, the productivity is lagging behind with respect to the world standards. This budget provides much needed encouragement through the allocations for education, health and employment primarily for the underprivileged of the rural and urban population, in budget 2008-09 mentioned below

• Education & health to get Rs 3,44,000 crore

• About 6,000 high quality schools to be built by 2009

• 3 IITs to be set up in Bihar, AP, Rajasthan

• 16 new Central universities to be built

• 22 Sainik schools get Rs 44 crore

• 300 more ITIs to be upgraded with an investment of Rs 750 crore

• Bhopal and Tripura to get one IISc. each and 2 colleges of art

• Healthcare allocation to be raised by 15%

• Rs 85 crore sanctioned for scholarships to students

• NRHM to get Rs 1,250 crore budgetary allocation

• Allocation for ICDS increased to Rs 6300 crore

• A national programme for the elderly for Rs 400 crore

• Rs 992 crore for national AIDS programme

• Sanitation to get Rs 1,200 crore

• Rajiv Gandhi drinking water mission to get Rs 7,300 crore

• Schemes for woman to get Rs 11,460 crore this fiscal

• Child related schemes to get Rs 33,434 crore

• Allocation for ministry of minorities doubled to Rs 1,000 crore

In the past 4 years budget was focused with a mandate to boost industrial sector and enable manufacturers to grow faster. A lot of consideration was give to facilitate Foreign Institutional investments and export of products and services during all these years. In spite of remarkable growth rate of Industries in the previous financial year 2006-07, this year a notable slow down in the growth rate is observed. The reasons one can think of, are the global recession, the appreciation of Rupee, etc., but there are many other factors that need to be thought of seriously.

None of us should ever forget that India is one of the largest markets in whole world, and when compared to many nations in Asia, Indian is a reckonable economic giant of Asia continent. Super powers in the world generate substantial revenue with in the country, and dependency on export market is nominal. A Strong internal consumer demand that nurture the local commerce and industries in India through health, education and infrastructural development is the need of the hour. It would then ensure a sustainable growth in our economy, with much more internal demand, then Rupee will be stronger and the imported products from other countries, would find it difficult to compete in Indian market.

Favorable responses on the budget 2008-09 from Industries and Corporate segments were noted. On March 3rd, 2008 at a press conference in New Delhi, Mr. Sunil Mittal, President, CII said, the Finance Minister has managed to address three main challenges through this budget namely GROWTH, INCLUSIVENESS and SUSTAINABILITY very wisely. According to CII, this budget aim to provide a boost to the consumption, which would trigger a demand led growth circle in the country. Mr. Mittal stated that CII feel privileged about some of its recommendations, which are included in the Budget 2008-09. To specify a few of them were CENVAT rate reduced from 16% to 14%; reduction of excise duties: Pharmaceuticals from 16% to 8%, buses \ truck chassis from 16% to 12%, small cars from 16 to 12% and two \ three wheelers from 16% to 12%. CII President said that the allocation of Rs.4000 crores for establishing two funds of Rs. 2000 crores each by SIDBI for meeting the needs-availability of risk capital & refinancing, would boost SME sector, and promote entrepreneurship. Enhancement in exemption limit for small-scale service providers from Rs 8 lakhs to Rs 10 lakhs, the relaxation in service charges by CGFTSI and the customs duty waiver to cold chain equipment is a welcome move, sources from CII mentioned.

Small industries felt relieved with the budget announcement confirming that import duties on scrap metal were abolished and export duty on chrome ore increased, as soaring raw material prices were affecting them very badly. Reduction of duty from 5% to nil on steel melting scrap and aluminum scrap is a great delight. Export duty Chrome ore has been increased to Rs.3000 per MT from Rs.2000 per MT in order to provide sufficient supply to value added manufacturing in India, like those who manufacture stainless steel, where Chrome ore is used. An industry source sited that Chidambaram did not mention iron ore at all, however the export duty on iron ore has not been increased (Rs. 300 per Ton on high grade iron ore and Rs. 50 per Ton on low grade ore). The general rate of excise duty was cut to 14 percent from 16 percent. Customs duty has been reduced for certain industries with a view to remove difference, though no change has been effected in the peak rate. On project imports custom duty has been reduced from 7.5 per cent to 5 percent, however a special CVD of 4 per cent would be imposed on some specified projects in the power sector.

World-class infrastructure has emerged as one of the most important necessities for unleashing high and sustained growth and alleviation of poverty in any economy. As the infrastructure to support other growth initiatives is poor, the Indian economy continues to be a laggard when compared to its developing peers. From a policy perspective, however, there has been a growing consensus that a private-public partnership is required to remove difficulties concerning the development of infrastructure in the country. The realization finally seems to be setting in. This makes the future of the Indian engineering sector extremely bright. Apart from highway development and construction and modernization of airports, the potential for the sector lies in the oil and gas space, where high global demand has led to increased action in exploration and production activities. However, scale and execution capabilities remain the mantras for success. Even though there is nothing quiet evident to boast of in budget 2008-09, may be the allocation listed below be a sigh of relief.

• Power sector to get national fund for transmission, distribution reforms

• IT sector to get Rs. 1,680 crore

The Economic Survey 2007-08 has said that the real challenge before the country lies in strengthening the foundations of sustained industrial growth. One of the biggest challenges to sustenance and stepping up of industrial growth lies in removing the infrastructural impediments in road “both rural and urban “rail, sea and air. Expressing concern over slowdown in the consumer goods segment, oil & industry and infrastructure constraints, the Economic Survey, calls for additional reforms, to raise growth to double digit.

There are matters of concerns about the budget 2008-09 - 60,000 crore allocations for Agricultural debt relief, which should be analyzed in depth.

• One big question is that, would it result in providing solace to the rural population? If we scrutinize the operations of banks in the rural areas, the agricultural loans in some the regions are not issued with the proper objective. There are people who manipulate the provision and take these loans by pledging gold that assures the safety to the banker for the money leaded and in turn they lend the amount to poor illiterate farmers on an exorbitant rate of interest. In such a case the money lenders benefits and the poor farmers are still in debt.

• In cases where the loans are dispersed as per the objectives, and the farmers who are paying back promptly, this scheme would encourage the habit of non payment of loans, setting bad expectations for budgets in future.

• The conditions prescribed appear to be inappropriate, as the area of land procession mentioned as criteria, which does not qualify a farmer to be in distress or poor. Since a farmer’s yield will defer with the condition of land (dry or wet), kind of crop cultivated and the accessible marketing facilities apart from the profit margin obtained.

• Except that the debt relief would open up more loan facilities from the banks, this budget does not specify any pragmatic scheme to boost agricultural sector and the rural population in terms of legitimizing the price parity with a proper rate regulation that ensures fare price income to the farmers, on the produces.
  

The general opinion about the budget 2008-09 from across the society being positive, let us stand by the objectives and hope for the overall prosperity, believing in the new theme for growth, “INCLUSIVENESS”.