Indian Budget 2005-06
Full Text of P. Chidambaram, Minister of Finance, Budget Speech(Feb 28, 2005)
I. THE MACROECONOMIC BACKDROP
The Immediate Past: Where We Were in 2003-04
5. In May 2004, the UPA Government inherited an economy that had, as we now know, registered a growth rate of 8.5 per cent in 2003-04 on the back of a poor 4 per cent in the previous year. While growth was indeed broad-based, the impressive growth rate was due largely to the restoration of output in the agriculture and allied sector. I had then commented that my immediate predecessor was a very lucky man, even while his predecessor was not! Notwithstanding the high growth rate, there were several disturbing trends which came to notice in May 2004. The first was the liquidity overhang at the end of 2003-04 which had spilled over into 2004-05. The second was the definite buildup of inflationary pressures as a result of a sharp rise in global petroleum prices. The third was an unanticipated 13 per cent deficiency in the south-west monsoon. The fourth was an apparent decline in business confidence that had led to a sharp downturn in new investment, and also showed up as current account surpluses. By any standard, these were formidable challenges, but the UPA Government was prepared to face these challenges.
The Present: Where We Are in 2004-05
6. The National Common Minimum Programme (NCMP) mandated the Government to maintain a growth rate of 7 - 8 per cent a year, to promote investment, to generate employment, to accelerate fiscal consolidation, to ensure a higher fiscal devolution, and to focus on agriculture, manufacturing and infrastructure. The NCMP also mandated the Government to provide universal access to education and health care and to assure one hundred days of employment to one person in each family. I believe that, in the space of 9 months, we have risen to the challenge and carved out many successes.
• According to the Central Statistical Organization, the growth rate in the current year is estimated to be 6.9 per cent, with the manufacturing sector expected to grow at 8.9 per cent.
• Inflation which touched a high of 8.7 per cent on August 28, 2004 has been reined in. As on February 12, 2005, the rate of inflation was 5.01 per cent which is more than one percentage point lower than what it was in the same week in the previous year. Inflation based on CPI for industrial workers was lower, and stood at 3.8 per cent in December, 2004.
• Business confidence has been restored and investments in 2004-05 have been buoyant. Non-food credit has increased by 21.2 per cent.
As the year draws to a close, we can predict confidently that all the engines of the economy are running at nearly full speed.
7. We have also fulfilled many of our promises to the common citizen. Last year, I had promised that agricultural credit will be increased by 30 per cent, and I am happy to inform the House that, against the announced target of Rs.105,000 crore, we are likely to achieve a disbursement of Rs.108,500 crore. Public sector banks and regional rural banks have added so far 58.20 lakh new farmers to their portfolio of borrowers. I had promised that education loans would be given liberally to students. As against 1,08,000 loans amounting to Rs.1,983 crore given in 2003-04, 1,40,000 loans amounting to Rs.2,249 crore have been given up to December 31, 2004. I had promised that the number of families covered under the Antyodaya Anna Yojana will be increased from 1.5 crore families to 2 crore families, and that promise has been kept. I had promised that a redesigned Food for Work Programme will be launched in 150 districts. That was done on November 14, 2004. I had promised that a National Rural Employment Guarantee Bill will be introduced. That has been done. I had promised that we would promote the concept of Self-Help Groups vigorously. In the current year, against the target of 1.85 lakh SHGs, we have already credit-linked 2.26 lakh SHGs, and we have disbursed credit to the tune of Rs.1,197 crore. Hon’ble Members will note that in each of these areas the focus of the Government’s attention has been the common citizen – be it farmer, student, self-employed woman or labourer in search of work and food.
The Year Ahead: Where We Want To Be in 2005-06
8. Growth, stability and equity are mutually reinforcing objectives. The NCMP leans towards decisive intervention by the State in favour of the poor. Given the resilience of the Indian economy, it is possible to mobilize the resources and launch a direct assault on poverty and unemployment. That is the only way to bring immediate relief to the aam admi.
The Big Picture
9. Let me first give the big picture. In 2004-05, Gross Budgetary Support (GBS) for the Plan was Rs.145,590 crore to which we added Rs.2,000 crore subsequently. As I shall explain later, the pattern of funding has changed consequent to the recommendations of the Twelfth Finance Commission (TFC). On a like-to-like basis, GBS for the Plan in 2005-06, works out to Rs.172,500 crore. This represents an increase of 16.9 per cent. Support for the Central Plan in BE 2004-05 was Rs.87,886 crore and in BE 2005-06 this has been enhanced to Rs.110,385 crore, representing a very substantial increase of 25.6 per cent. On priority sectors and flagship programmes falling under the NCMP, I propose to provide an additional sum of Rs.25,000 crore in the next year.
10. For example, the allocation for education in 2005-06 will be Rs.18,337 crore. Next only to education, the plan allocation for rural development will be Rs.18,334 crore. On subsidy for fertilizers, the estimate is Rs.16,254 crore. The estimated expenditure on health and family welfare is Rs.10,280 crore.