Inflation, agrarian crisis key challenges
Indian Prime Minister Manmohan Singh (C) and Congress Party President and UPA Chairperson Sonia Gandhi (L) are greeted by farmers in New Delhi on February 25, 2008. Hundreds of farmers met with Prime Minister Manmohan Singh and Congress Party President Sonia Gandhi ahead of the 2008-2009 Union Budget, for favouring a charter of demands which include waiver of loans, reduction in rate of interest and renumerative price for farm produce.Photo: AFP
Politically correct may not always be economically correct. Indian Finance Minister Palaniappan Chidambaram would seek a balance between political and economic correctness when he presents his annual budget on Friday, possibly the last before fresh parliamentary polls scheduled next year.
A major challenge for Chidambaram will be to keep a check on inflation, which has been a major worry for the government and Reserve Bank of India, without hurting investment and economic growth momentum.
Unchecked inflation will be bad news for the country's ruling Congress-led United Progressive Alliance as elections to legislatures in nine states lined up this year before the general polls early next year.
Rise in prices of essential commodities has been one of the key ammos in the attacks by Left parties, which provide crucial outside support to the Congress-led government, and main opposition BJP.
Setting the agenda for the government in an election year, Congress chief Sonia Gandhi met Prime Minister Manmohan Singh three times in a week to discuss agrarian crisis and farmers' debts. She also had a meeting with Chidambaram early this week.
These meetings came against the backdrop of Congress' demand for announcement of loan waiver, lowering interest rate on farm loans to four percent and a relief package for farmers reeling under heavy debts.
Congress is of the view that a package for farmers is crucial to the party's electoral calculations. That the agrarian crisis is on the top of the party's political agenda was evident when the government conceded last week that there were 800 farmers' suicide cases in 2007 alone, with majority of them in states ruled by Congress.
Congress managers believe the story of the country's booming economic growth would be meaningless if it is perceived to have left out the farmers' problems.
The agriculture sector has been a laggard in the last few years and has at times tended to pull down the gross domestic product (GDP) rate. A four percent growth of farm sector is seen as vital to sustain a high GDP growth rate, economic analysts said, adding that this is likely to be reflected in the budget.
With Left parties and BJP spearheading the attempts to portray the government as anti-farmer and anti-common man, the ruling alliance's reflexes to be seen countering that has become stronger and this may result in higher budgetary allocation for social sectors like healthcare, education and village infrastructure.
The coming budget would, therefore, also include higher allocation for fresh spending proposals of women, who have become a key constituent of the electorate, and higher allocation for self-help groups and other employment-generation schemes.
The finance minister is also under mounting pressure to come out with further relief for the labour-intensive export sector hit by appreciating value of Indian national currency rupee against US dollar.
Since salaried income taxpayers form a sizable chunk of voters, the finance minister is likely to announce some concessions in the form of raising the lower limit for taxation and pushing up the taxable income slabs.
It remains to be seen if the finance minister effects a hike in corporate tax but an upward revision in duties appears to be a certainty.
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