The Hindu Business Line : A new Dream Budget

THE Finance Minister, Mr P. Chidambaram, gave India a dream Budget in 1997. A series of measures introduced by him were all designed to boost industrial investment, corporate sector growth and business competitiveness.

The South-East Asian crisis, thereafter, was a huge setback but the design of the 1997 Budget laid the foundations for a new, resurgent, reconstructed Indian industry which came through a great deal of pain to build competitiveness.

The 2004 Budget of Mr Chidambaram — his third — has a completely different focus and priority set. Far from the 1997 spotlight on industry, the latest version is aimed at gradually bringing the 600 million people who live in the rural areas, dependent largely on agriculture, into the mainstream of economic life. And, whilst this focus is not new, the comprehensiveness of the approach, the multiple initiatives, and the variety of measures clearly far in exceed past efforts.

Much thought has gone into this exercise especially as he had a mere five weeks to prepare the Budget. The growth and expansion of food, agriculture and the rural economy would fuel new and higher growth as also the feel-good that was necessary. An expanded economy and increased purchasing power automatically impact industry and services.

The Budget has put out a directional change which will lead to food and agricultural reform.

The second focus is infrastructure which can add 2 per cent to GDP growth quite easily. The boost given to telecom in this Budget is likely to make a considerable difference.

Added to the ongoing progress in Infrastructure, the environment is likely to improve steadily and the telecom success story will be replicated in other infrastructure sectors.

Turning to industry and investment, there are several measures to cheer. First, the review of FDI caps. Both civil aviation and insurance are fundamental sectors. One is hard infrastructure, the other is soft. Just as people need improved airports and airlines, so do they need insurance services especially health, education and life. And, all these, sectors need significant financial resources which can flow in and speed up growth.

In this era of globalisation, the need is for confidence levels which can, in turn, produce new miracles for India, in India. There were no expectations from the international community of clear signals of liberalisation of FDI (foreign direct investment). That it has happened, unexpectedly, is even more welcome. It will be warmly received as the new Government's commitment to continue to welcome FDI and to do so where it matters most and where FDI is also raring to come.

There is a point of view — not correct — that every public sector unit should be disinvested and privatised. This is not the need. The real requirements is to free the PSUs from interference and give them space to perform. Also, there are several strategic industries that would need to remain, in the national interest, within the purview of government.

Whilst the Budget opens a new window on restructuring, it will be important to see whether the government is going to free the PSUs and allow them to achieve their potential. The human resource in PSUs is as good, if not better, than the private sector, but these companies need Delhi to step back from interfering in their day-to-day operations. At the same time, the disinvestment process — the privatisation effort — has to continue for a large number of units that have no need for government control or cover.

This will give security to PSUs under competitive conditions which is the best possible remedy to retain employment. The critical aspect of employment generation is the promotion of self-employment and the Budget has focussed on micro-financing. Also, on training, especially vocational, to prepare people with new skills. The Finance Minister has also spoken of public-private partnership which can be a reality. The employment challenge just cannot be met from manufacturing or services. Self-employment has to be a key component of strategy and the harnessing of micro-financing methods and schemes — efficiently and effectively — will make a huge difference.

In the same way, the Budget's focus on education and health creates the enabler for employment and efficiency of the country's enormously rich human resource. Here, as in other areas of government schemes and programmes, the concern is always about implementation. NGOs and other institutions outside government can play a major part in putting schemes into practice.

Looking at Budget 2004, there is a sense of satisfaction. A new coalition. A new government. Four weeks to prepare. An admirable job done. Perhaps the more reformist Budget will be up in February 2005 and the two taken together will make for huge change and transformation of India's development.

(The author is Chief Mentor, CII.)