India's 'feel-good' budget aims to please the voters
Amrit Dhillon in New Delhi
India's Finance Minister Jaswant Singh yesterday lived up to most predictions by unveiling a package of populist measures designed to please middle-class voters in his maiden budget.
'Selectively good for some sections of society and electorally very good indeed,' said economist Bibek Debroy in a reference to the fact that several state elections are happening this year and a general election is scheduled next year.
The ruling Bharatiya Janata Party had been dismayed at the middle class's unhappiness over the last budget, so Mr Singh had been expected to announce voter-friendly measures aimed at giving people more money to play with.
The 'feel-good' budget (which Mr Singh wrote himself in a break with tradition), gives the middle class tax breaks for their children's school fees, makes private medical treatment (only the poor go to government hospitals) cheaper by extending tax benefits to private hospitals, and reduces their income tax burden by abolishing a 5 per cent surcharge on personal income.
To drive consumer demand, computers, cars, CDs and audio cassettes, pressure cookers and clothes will be cheaper thanks to lower Customs duties. In fact, Mr Singh has cut a whole range of Customs duties. He promised continued liberalisation of the economy through privatisation and deregulation of state-protected sectors.
Director-general of the Confederation of Indian Industry, Tarun Das, called the budget 'great'. 'It is a budget for growth. It has outlined new strategies for growth with a reduction of excise duties,' he said.
The poor also get some benefits, perhaps the biggest being a drive to provide them with health care.
Subsidised wheat and rice for the poorest of the poor will also be expanded to cover an additional five million families from the present 10 million.
For farmers, reeling from last year's drought, the budget was disappointing.
Mr Singh said Indian farmers needed to move away from traditional crops such as wheat and rice - which fetch them government-fixed, minimum prices - to more lucrative cash crops. Apart from advice, there was precious else.
Faced with a distressingly low economic growth rate of 4.4 per cent for the current fiscal (compared to 8 per cent in China last year), Mr Singh's prime concern has been to rejuvenate growth, hence the mildly expansionary measures.
'It's a sensible, fiscally neutral, economically sound budget focussed on growth,' said economist Surjit Bhalla. 'The way he has increased consumers' purchasing power will help growth. And the budget's thrust on improving infrastructure, which is lagging far far behind China's, will also boost growth.'
The government plans to invest around 400 billion rupees (HK$65.5 billion) in 48 new road projects, modernise Mumbai and New Delhi airports to raise them to international standards, set up private airports in the southern cities of Hyderabad and Bangalore, and improve the country's main ports.