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Not A Dismal Picture

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Today, 12 months down the road, I stand corrected. The disappointment was both misplaced and premature. Misplaced, because the UPA government had enunciated ‘faster and more inclusive growth’ as it’s key objective fairly early in the day, and setting out a budget clearly attuned to serving the task should have been a positive rather than a negative.
After all, we finally had a government that was allocating expenditures to areas all of us thought governments should focus on: agriculture, rural development, education, health and infrastructure. What was so wrong with that? Our past history of poor delivery on this front? But that was prejudging delivery and history, as we well know, is not always the best guide to the future.

Contrary to reports in the popular press, investments in flagship schemes such as the Sarva Shiksha Abhiyan (SSA), Pradhan Mantri Gram Sadak Yojana (PMGSY), Accelerated Irrigation Benefit Programme (AIBP), Indira Awas Yojana, etc. are beginning to pay off. Taking the first, for example, while the Annual Survey of Education Report (ASER) 2006 was fairly critical, ASER 2007 (Rural) reports a reduction in school drop-outs across all age groups in rural India with significant improvements in reading, writing and comprehension abilities as well. Progress under the various Bharat Nirman projects, while slow initially, has now picked up speed, with achievements in FY06 and FY07 ranging between 75-80per cent of targeted levels in the case of roads, and between 75-89 per cent in the case of the AIBP (source bharat nirman website). The increased emphasis on agricultural research and extension services is, of course, welcome and long overdue. In fact, public investments in agriculture, which had been declining in real terms for more than a decade, have witnessed a smart pick up in the last three or four years. Recent data (April-December ‘07) from the CAG underline this trend- after many years of very poor growth, the Union Government’s capital expenditure outlays under the Central Plan are likely to overshoot Budget Estimates for this fiscal. Finally, with regard to non-rural infrastructure — power, roads, ports, highways, rail, etc. that are key to ensuring faster growth of labour-intensive manufacturing industries, the government has clearly embraced the PPP route and while there have been several hiccups in the roll out, one gets the sense of steady forward movement in this regard as well.
It seems, thus, that in a significant break from history, we finally have a government that is striving to deliver on elements critical to reaping the country’s demographic dividend and sustaining a higher growth trajectory in the future.
There are undoubtedly disappointments with the budget as well, viz., burgeoning fertiliser subsidies, pushing agricultural credit too far, too fast, moving a tad too slowly on the GST front, inverted customs duty structures, halting disinvestment, not grasping the opportunity for deeper fiscal consolidation in the last couple of years and thus making room for inflation management and the SPC, and so on . But, to my mind, the positives are overwhelming. Through its budgets at least, if not much else, the UPA government is delivering on its objectives of faster and more inclusive growth, perhaps “…not wholly or in full measure, but very substantially”. And that is a significant positive.
The author is Senior Economist at Mahindra and Mahindra
(Businessworld Issue 25 Feb-3 Mar 2008)

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