The Hindu Business Line : ‘Revenue deficit to be wiped out by 2008-09’

The Finance Minister, Mr P. Chidambaram, on Tuesday made a fresh pledge to take India beyond a “high rate of growth” to a “more inclusive growth”, and said that India was ready to wipe off its revenue deficit by 2008-09.

“The one line that I have refused to cross is the line of fiscal prudence and responsibility,” he said, while addressing a meeting organised jointly by the Confederation of Indian Industry and the Asia Society in New York as part of the ongoing Incredible India@60 campaign.

The Finance Minister said he would contain fiscal deficit this year to the budgeted 3.3 per cent and bring it down below 3 per cent next year. On the strength in the Indian economy, he said in the “last four years we have rediscovered the rhythm of high growth”.

Growth story

The GDP had grown by 8.6 per cent in the last four years and 9.4 per cent last year, fuelled by the growth in both industry and services. Till 2001-02, India’s growth was driven by consumption, after 2003 investment had become an equal driver of growth and after 2004 investments had overtaken consumption to drive India’s growth. According to a recent RBI report, investment in the current fiscal was 20 per cent higher than in the previous year.

“We’ve also made productivity gains in both labour and capital”, and savings were high at over 33 per cent of the GDP last year, he said.

But, added Mr Chidambaram, while fiscal responsibility and other factors had fuelled India’s high growth, which he was confident could be maintained in the medium term, “there is more work to be done on the reforms side. And growth is not an end in itself but means to an end”; the ultimate end was the participation of the entire 1.1 billion Indian people in the Indian growth story.

Health, education

A sobering thought was that “26 per cent of Indians still live in abject poverty”, and even those who had enough to eat did not have access to desirable quality of water, sanitation, health care and education. Most of these public goods and services had to be provided by the government, even though there was a growing partnership between the Government and the private sector in many areas, such as health care and some other services.

Reforms would, and had, ensured growth and there was no dearth of funds for allocation to the social sectors. Allocation to health had double from Rs 7,000 crore in 2003-04 to Rs 14,300 crore in the current year, and quadrupled from Rs 7,000 crore to Rs 28,600 crore in education during the same period.

Growth with equity

The Finance Minister added that reforms “can create wealth and millionaires in India, help Indian ventures abroad” and help Indian companies to make acquisitions overseas. But the other side of reforms was also to ensure a more equitable distribution of wealth and services. “Growth is necessary but not sufficient; growth has to be inclusive. Growth with equity is the only road that India can take.”

Only when these goals are achieved would India become, apart from ‘incredible’, also a “credible nation”, added Mr Chidambaram.

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