Tags:
Journalism of Courage
Contrary to expectations, Union Finance Minister Jaswant Singh did not do a Santa Claus act in his interim budget for 2004-05. To be sure, it does have the forthcoming elections in mind, but those who thought that it would be replete with last minute giveaways to appease the BJP-led government8217;s votebanks may be disappointed. Barring the decision to merge DA with the basic pay of government employees 8212; which was definitely designed to enhance the much vaunted feel-good factor in their ranks 8212; this was not the classical 8220;election8221; budget. The truth is that the Union government cannot simply tinker around with tax rates when presenting an interim budget for the purpose of a vote on account to enable it to meet essential expenditures during the first four months of 2004-05.
Singh has instead budgeted for growth. His foremost concern is to continue the momentum of faster economic growth that set in this fiscal. The measures announced on January 8, 2004, were also intended to consolidate the growth process even if they largely benefit the middle class in urban India. Unlike last year, when Singh ducked questions regarding the likely GDP growth in 2003-04, this time he confidently revealed that it will be between 7.5 to 8 per cent, with inflation remaining benign at 4 to 4.5 per cent. The interim budget assumes that such a growth rate will continue in 2004-05 as well. Faster growth provides elbow room for fiscal consolidation which, in turn, spurs growth in a virtuous cycle. Don8217;t the fiscal deficit numbers as a share of GDP look respectable in this context? Singh proudly states that the government has demonstrated its resolve about fiscal consolidation by performing better than budgeted targets: the fiscal deficit 8212; which measures the Centre8217;s borrowings 8212; thus is lower at 4.8 per cent of GDP as against the budgeted 5.6 per cent. But these numbers have also hugely benefitted from the debt swaps of state governments. In budgeting for growth, Singh has been able to step up capital spending more than has been budgeted for this fiscal. The growth impulse will also benefit from measures announced by Singh to step up capital formation, like strengthening the role of the IDBI as a lead development finance institution, schemes such as the Agricultural Infrastructure and Credit Fund, the Small and Medium Enterprise Fund and Industrial Infrastructural Fund, extending fiscal benefits to new projects in the power sector, and so on. If there are misgivings, they pertain to getting public sector banks to provide cheaper credit to the agricultural sector.
