Thursday, March 15, 2007


The UPA Government has presented its 4th budget in parliament on 28th February, in the backdrop of economic growth of 8.5% per annum on an average during the last 3 years. The growth rate is completely un-precedent. The industrial sector as well as the service sector growth rate has crossed l1% per annum. The matter of concern is poor growth in the agricultural sector of only about 2.7% during the last 5 years. The plan proposals of the government to provide necessary irrigation facilities, warehousing facilities, better seeds and technology for a better agricultural growth has so far not shown any result. The agricultural credit has grown significantly and has reached to the level of 2,25,000 crore. This increase in credit will not contribute to growth unless it is utilized for creating genuine capacities, and for providing better technology. Another green revolution is necessary, failing which economic growth cannot be sustainable and the inflationary pressure on agricultural commodities is further likely to hit the common man.

Resource Crunch and Debt Trap  

The net collection of tax by the Government is projected at Rs. 403,872 crore during 2007-08. Against this, a sum of Rs. 4,21,219 crore has been estimated for repayment of debt and interest burden on the debt. The fresh borrowings of the Government have been projected at Rs. 371,803 crore and net of repayment more than 1.5 lakh crore. Incremental debt is being obtained to meet various budgetary requirements. The Government needs to a significantly deep debt restructuring and one time settlement plan and in any case has to commit no further borrowings at any cost. The tax collection of the Government has already gone up by more than 100% in last 3yrs and in spite of such a heavy doss of taxation, the Government is unable to meet its liabilities and to have adequate resources for planned growth. The planned capital investment has been budgeted only to the extent of Rs. 30476 crore during 2007-08. This is only 4.47% of the total budgetary expenditure during the year. Unless the Government is able to allocate larger resources for planned capital expenditure, the infrastructure sector including power sector, roads, ports, rural telecom, airports, irrigation and education sector cannot be looked after adequately and appropriately.

Rising Interest Rates  

The interest rates have recently gone up very significantly both on deposit as well as on advances. This may have an adverse impact on economic growth and economic viability on small and medium size industries.


The employment front is still dismal and unless large rural population is provided employment opportunities in agriculture, agro industries and small and medium size manufacturing sectors by public-private partnership, the number of unemployed youths will keep on increasing.

Vocational Training 

The plan to develop 1396 Industrial Training Institutes (ITI’s) as Centers for Excellence is a good idea. The vocational and specialized training has to become very effective and have a larger reach in view of substantial shortage of adequate qualified and trained manpower in industrial sector as well as in service sector.

Commodity Trading 

The Government has announced ban on trading of wheat, rice, urdh and toor dal from being traded on Commodity Stock Exchanges, in the backdrop of substantial increase in prices of agricultural commodities. The commodity exchanges as well as storage and hoarding has to be regulated in an appropriate manner to curb the malpractices on one hand and permitting free movement and storage of commodities, subject to regulatory guidelines.


The education cess has been increased from 2% to 3%. This amount is required to be directly spent on creation of new schools, education material and for provision of teachers and other necessary educational infrastructure. The quality of education is also a matter of concern in the midst of reports that in certain rural areas even the 8th Std. students are not able to answer 2nd Std. Questions.

Bharat Nirman 

The Government has allocated larger resources towards growth of education and health but considering the fact that on an average only 4.4% of the allocated budgetary requirements is being spent on planned capital expenditure; the resources allocated may not generate the desired result. The government need to take some very sincere and serious steps to cut down its revenue expenditure and overheads and on the other hand reduce the burden of debt servicing so that adequate resources can be allocated for infrastructure development of the country.


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