India’s 60th budget

On Feb 29th, Palaniappan Chidambaram, India’s finance minister, delivered his seventh budget becoming the second Finance minister to deliver a fifth straight budget after Manmohan Singh, India’s current prime minister. The 2008-2009 budget marks the 60th anniversary of the Budget of independent India.The 1947 Budget is regarded as an interim Budget.

The highlight of the budget was a loan waiver of Rs 500bn ($12.5bn) to small and marginal farmers and Rs100bn ($2.3bn) debt settlement scheme for other farmers. Note that, agriculture employs about 60% of the labor force and accounts for about 20% of the GDP. Recent years have seen an alarming increase in the number of Indian farmers killing themselves. The crop failures (due to drought and pests) and the developed nations’ high subsidies are the main causes of the current plight of the farmers.

Indian as well as foreign media accused the FM of delivering a populist budget to help the Congress party in the coming elections. The Economist argued that the waiver would not help those who really need it. The big farmers would not qualify for the scheme and the small farmers are mainly in debt to the moneylenders.
Economist Article – India’s budget – Write-offs as high as an elephant’s eye

Vir Sanghvi in his weekly column CounterPoint argues otherwise.
Counterpoint: The Budget & the Farmer

He states that in a complex economy like India, the government has to intervene when the free market principles fail to equitably distribute the wealth and that SEZs also violate the free market economics. He counters claims of loans not helping those in need by mentioning that 58 per cent of rural indebtedness is to banks and institution.

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One Response to “India’s 60th budget”

  1. Anonymous Says:

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    Good post!

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