India is predominantly an agricultural country where two-thirds of the total population is supported for livelihood by agriculture. It is the single largest private sector occupation providing employment to nearly 60% of the country’s work force. Agriculture makes single contribution to Gross Domestic Product (G.D.P.) of the country and accounts for nearly one-fourth of the total product. Share of agricultural products in country’s total export earnings is nearly 15%.Furthermore,agriculture provides basic raw material to a number of industries such as textile industry, silk, sugar, rice and flour mills, milk products, beverages, and food products etc. Horticulture, gardening, animal husbandry, dairy, fisheries are its allied sectors. Out of total geographical area of 329 million hectare, are under agriculture crops amounts to nearly 190 million hectare out of which barely 57 million hectares is irrigated. It is a pleasant surprise that after 60 years of independence India’s finance minister Shri P. Chidambaram presented 2008-09 budgets, his fifth straight budget focused on agriculture. The budget is not only a blanket waiver on farm loans amounting to Rs.60,000 core covering some 40 million farmers but also paid due attention towards major irrigation projects. Social sector was another major benefactor in the budget.
The finance minister, in his budget speech was optimistic to predict 8.8% economic growth for the current fiscal year where as various agencies had predicted 8.7%, services and manufacturing being the main contributors. According to him Indian growth story has been an inspiring tale but pace of the expansion of agriculture sector was disappointing, hence proper attention to the sector. Main proposals in the budget include a hike in the exemption limit of income tax with so molar concession to the woman and senior citizens. Reduction in central value added tax (cenvet) from 16% to 14% is one of the few steps to some sectors of industry. For the corporate sector while the direct tax rate remains unchanged, some concessions in the form of lower custom duty and excise duty for specific industries like automobiles and pharmaceuticals have been proposed. As a consequence filter and non-filter cigarettes shall cost more whereas small cars, breakfast cereals, pharmaceuticals and sports goods would be cheaper.
Earlier the national rural employment guarantee scheme launched by Dr. Manmohan Singh provided 100 days employment to one members of each rural family was covering some 300 districts from all over India. The current budget proposes to extend the scheme to the entire country. For the education sector there is an allocation of Rs. 34,400 core, which amounts to a 20% increase over the previous year’s provision. Out of this a sum of Rs. 8,000 core are meant for Sarva Shikhsha Abhiyan and mid-day meal scheme, Rs. 4554 core will go for secondary education. For higher education a sum of Rs. 3,205 core has been allotted. Three new Indian institute of technology (I.I.T.) will come up in Bihar, Rajasthan and Andre Pradesh. Madras’s will also get Rs. 4,500 core for modernization.
For India’s defense there is an increase of 10% over the last year’s allotment. For the first time budget allotment for defense has crossed the figure of Rs. 1, 00,000 cores. this is a clear indication that there is going to be no let up in process of modernization that there is going to be no let up in process of modernization of the armed forces. The focus is on up gradation of armaments with the allocation on capital outlay amounting to Rs. 48007 core. Last year’s capital expenditure was only Rs. 37,705 core against an allotment of Rs. 41,922 core. Allotted sum could not be utilized in full for various reasons. The army has strength of 1.3million personnel and continues to be the biggest recipient of the defense budget with an allocation of Rs. 36,270 core. Share of navy amount to Rs. 7,421 core against last year’s Rs. 7,097 core. Defense research and development organization receives Rs. 3,394 core against last year’s 3,196 core, a hike of 6.2%.
The social sector revives the maximum share of Rs. 95,919 core. The central plan outlay has been raised from Rs. 2, 92, 00 core of the previous year to Rs. 3, 76,000 cores in 2008-09 with an increasing of 29%. Allocation for social service goes up from Rs. 75,162 core to Rs. 95,919 core, an increase of 28%. Outlay for energy sector amounts to Rs. 93,815 core against Rs. 72,280 core of the previous year. Transport sector also gets a hike up to Rs. 84,177 core in place of Rs. 68,930 core of the previous year. For rural development there is a provision of Rs. 23,831 core and industry and mineral segments have a share of Rs. 28,836 core as against Rs. 17,963 core of the previous year. Internal and external budget resources have significant rise up to Rs. 2, 00,000 cores from Rs. 1, 44,000 cores having far greater onus on public sector undertaking to finance the plans of the central government.
In view of the 2010 common wealth games the finance minister has earmarked Rs. 1111.81 core for the ministry of sports and games. Apart from this sponsorship of sport persons / employees would be exempt from benefit tax and import duty on some raw materials for sport goods equipment manufacturer has been removed. For common wealth games preparations renovation of Stadia and Nolenfde sports federation would get a handsome share.
Income tax exception limit has been raised from Rs.1, 10,000 to Rs.1, 50,000 for all classes whereby there will be a minimum benefit of Rs.4, 000 to the tax payer. For women the exemption limit goes up to Rs.1,80,000 instead of Rs.1,45,000 whereas for senior citizens it has been hiked from Rs.1,95,000 to Rs.2,25,000.Now for an income of Rs.10,00,000 an individual’s income tax liability would be Rs.2,05,000 against a liability of Rs.2,49,000 under the ongoing tax structure whereby the minimum individual benefit would be Rs.40,000.For women the similar income would be taxed by Rs.2,02,000 as against Rs.2,45,500 during the previous year. Clearly, the budget may be defined as a “gender sensitive budget” as it is going to provide relief to women in both Urban and Rural areas.
According to the Prime Minister Dr. Manmohan Singh budget 2008-09 is pro-agriculture and pro-investment as it would address the problems of farm sector and would lead to an overall development. The UPA chairperson and congress president Mrs. Sonia Gandhi’s comments over the budget were-“Today is a happy occasion. The waiver of loans on farmers by UPA government is a revolutionary step. I congratulate the UPA government and the finance minister for that”.
In the opinion of BJP leaders the budget is election manifesto of the ruling party.BJP vice-president Mukhtar Abbas Naqvi remarked, “It is a clear signal which shows that elections will be held early. The nature of the budget is a virtual declaration of mid-term election.
Budget 2008-09 has given birth to great expectations to some sectors while major apprehension among others. The corporate sector is pleased, women as also senior citizens are happy as the farmers for waiving of the loans. But what about those who are under heavy debts of private money lenders? The most attractive part of the budget is the unrelenting focus on social sector. Outlay for education and health is really encouraging and woman and child development have secured due attention. A separate scheme for clean drinking water in schools and water deficient areas is to be introduced. Announcement of a tax holiday for five years for any hospital built anywhere in India is also noteworthy. National rural employment guarantee scheme has been extended to all 596 rural districts of the country. Initiatives spread across the entire spectrum of economy should certainly maintain the current growth momentum. The budget has three important reform issues- (i) Disinvestment, (ii) FDI in retail and (iii) labor reforms.
It may even trigger additional growth in pulse in some sectors specially the farming sector.