The big push

Finance Minister P. Chidambaram has managed to strike a balance. The UPA government's third Budget has attempted to triangulate three distinct needs. First, to shape monetary and fiscal policy to the changing contours of a rapidly growing and globalising economy and ensure that the economy does not falter on the growth front.

Finance Minister P. Chidambaram has managed to strike a balance. The UPA government's third Budget has attempted to triangulate three distinct needs. First, to shape monetary and fiscal policy to the changing contours of a rapidly growing and globalising economy and ensure that the economy does not falter on the growth front. Two, it has tried to ensure that old economy's traditional bulwark, agriculture, gets the necessary thrust. The third is perhaps the most critical: ensuring that the fruits of development reach the poor and unemployed.

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Personal and corporate taxes have not been hiked and excise and customs duties further rationalised. With 54 per cent of GDP coming from services, it is rational that the services sector contributes its share. In fact, the long-term objective of taxing goods and services at par will align India's tax philosophy along global lines. The new deal for agriculture includes enhanced rural lending by banks, higher spends on irrigation and cheaper short-term credit to farmers. Overall, improvement of rural infrastructure will put money in the hands of farmers. But policy measures need to be strengthened to ensure that credit reaches those who need it—51 per cent of cultivator households still cannot access any form of finance. To reach the targeted 4 per cent growth in agricultural output, substantial investment is still needed to lessen dependence on the monsoons. Budgetary allocation for the UPA government's anti-poverty and employment generation programmes have been hiked, thereby satisfying CMP requirements and towards muting Left criticism.

To a great extent, Mr Chidambaram has also been fortunate. Better-than-expected growth and buoyant tax collections have helped him return to the path of fiscal correction. While it is encouraging that the fiscal deficit is targeted to be cut to 3.8 per cent, the combined Centre-state deficit is still 9 per cent, one of the highest among rated sovereigns. It is also a matter of concern that the issue of subsidies, especially on fuel and fertiliser, have once again been avoided. Nevertheless, industry cannot complain that conditions have been altered unfavourably. "Growth is the best antidote to poverty," the FM asserted. The ball is now in India Inc's court.