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India Steps Up War on Poverty in Budget | ASHARQ AL-AWSAT English Archive 2005 -2017
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NEW DELHI (AFP) – India has stepped up its war on poverty in a budget unveiled on Wednesday that aimed at boosting stagnant farm output and raising spending on education and health.

“The economy is in a stronger position than ever before,” Finance Minister P. Chidambaram told parliament as he presented the ruling Congress coalition’s budget for the fiscal year to March 2008.

“I have put these revenues (from growth) to good use to promote inclusive growth, equity and social justice,” said Chidambaram whose government has pledged to put the “common man” at the top of its agenda.

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 percent.

Both farm output and inflation have become urgent issues with polls looming in India’s politically pivotal and most populous state Uttar Pradesh in two months and federal elections at most two years away.

Congress attributed its losses in polls in the breadbasket state of Punjab and northern Uttarankhal on Tuesday partly to voter anger over rising prices which have badly hit India’s poor masses who propelled it to power in 2004.

The pro-poor tilt of the budget failed to lift the share market which was already reeling from forecasts of a US slowdown. At mid-afternoon the benchmark Sensex index was down two percent or 269.97 points at 13,208.60.

“The budget is essentially populist, aimed at catching votes,” said Surinder Choudhari, head of auto components maker Krishna Fabrications.

“There’s nothing extraordinary in it — and nothing shocking,” he said.

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 1.1 billion 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 percent for the full year.

Slow farm growth was cited as a key factor in data released Wednesday showing that Asia’s fourth-largest economy grew by a lower-than-expected 8.6 percent in the third quarter, down from 9.3 percent a year earlier.

Farming is expected to grow just 2.7 percent this year, down from six percent a year earlier. In the third quarter, the farm economy expanded 1.5 percent.

That contrasts with manufacturing growth of 11.3 percent which has become the main driver of expansion.

The government is aiming to achieve a “sustainable growth trajectory” of around 10 per cent 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 percent, announcing programmes to increase school attendance and boost the number of schools and hire 200,000 more teachers.

India would only be able to benefit from “its demographic dividend” of a young population if they are educated, he said.

Chidambaram, a keen liberaliser, steered clear of any contentious “big bang” privatisation or labour or other reforms that might alienate voters or the coalition’s communist allies who provide key parliamentary support.

The government boosted defence spending for India’s 1.3 billion armed forces, the fourth largest in the world, by 7.8 percent to 960 billion rupees (21.3 billion dollars).

It also pressed ahead with meeting its goal of cutting the fiscal deficit as a proportion of GDP to three percent by 2009. It set a target of 3.3 percent for the next financial year, down from 3.7 percent in the current year, slightly better that the 3.8 percent forecast.