New Delhi: The budget presented by finance minister P Chidambaram aims to step up the government’s war on poverty by boosting stagnant farm output and raising spending on education and health.
“The economy is in a stronger position than ever before,” Chidambaram told parliament as he presented this year’s budget just a day after the ruling Congress party lost crucial elections in Punjab and Uttarakhand, largely blamed on rising inflation that has increased hardships faced by the common man.
“I have put these revenues (from growth) to good use to promote inclusive growth, equity and social justice,” said Chidambaram.
But quoting India’s first prime minister Jawaharlal Nehru, he said: “The main challenge is agriculture — everything else can wait.”
He outlined plans to hike farm production and rural incomes and said he was confident the government could wrestle down inflation hovering at two-year highs of 6.6%.
Both farm output and inflation have become urgent issues with polls in the key state of Uttar Pradesh just two months away.
Congress attributed its losses in polls in the breadbasket state of Punjab and northern Uttarankhal partly to voter anger over rising prices.
Chidambaram announced more spending on irrigation, fertiliser subsidies, seed development and cheaper farm credit along with duty cuts on a host of goods including edible oils to combat inflation.
“There is no death of (agriculture) schemes, no dearth of funds. What needs to be done is achieve the intended outcome,” Chidambaram said.
With over half of the 110 crore population dependent on the farm sector, low agriculture output has cast a shadow over the “inclusiveness” of India’s economic growth which Chidambaram said would meet an earlier estimate of 9.2% for the full year.
Farming is expected to grow just 2.7% this year, down from six% a year earlier. In the third quarter, the farm economy expanded 1.5 %.
That contrasts with manufacturing growth of 11.3% which has become the main driver of expansion.
The government is aiming to achieve a “sustainable growth trajectory” of around 10% by 2012, the magic double-digit number that economists say is necessary to achieve to make a significant dent in poverty.
“Faster growth is essential for faster poverty reduction. There is no other trick to it,” Chidambaram said.
Chidambaram hiked education spending by 34% announcing programmes to increase school attendance and boost the number of schools and hire 2,00,000 more teachers.
India would only be able to benefit from “its demographic dividend” of a young population if they are educated, he said.
However, the pro-poor tilt of the budget failed to lift the spirits of the share market which was already reeling from forecasts of a U.S. slowdown. The benchmark sensex of the Bombay Stock Exchange ended 541 points to end at 12,938.