Agence France Presse

New Delhi, February 28:

India’s Communist-backed coalition government announced a budget today aimed at helping the poor, saying it wanted to ensure the nation’s new prosperity brought ‘the greatest good to the greatest number.’ “The purpose of democracy is to empower the poor and to eliminate the scourge of poverty,” Indian finance minister P Chidambaram told parliament. He said the main thrust of the budget was to create jobs in a country of over one billion where tens of millions of are unemployed or underemployed, as well as to give a boost to agriculture in the farm-dependent nation.

The economy of Asia’s fourth-largest economy was seen growing by 6.9 per cent in the financial year ending March 2005 after patchy monsoon rains, compared with 8.5 per cent the previous year, Chidambaram said. He added that “nearly all engines of the economy were running at full speed.” He slashed customs tariffs on a range of items from fuel to non-agricultural goods like textile machinery in a move aimed at bringing import duties into line with levels prevailing among other Asian nations. He also imposed a new tax on fuel to improve the infrastructure of India’s potholed roads, congested ports and shabby airports as well as broadened health and insurance schemes and increased spending on ‘education for all.’ He added there was a strong case for further cutting the limits on foreign direct investment and that proposals would be put forward ‘after consultation.’ He said the fiscal deficit for the financial year to March 2005 would fall to 4.5 per cent of gross domestic product (GDP) from 4.8 per cent the previous year.

The announcement was in line with a fiscal responsibility law obliging the government to cut the budget deficit by 0.3 percentage points each year. It fell short, however, of hopes the government might reduce the deficit further to 4.4 per cent of GDP. India has been seeking to lower a stubbornly high fiscal deficit that economists have said is a key factor stopping the economy from achieving its growth potential. India’s combined federal and state deficit is believed to be around nine per cent of GDP. The minister announced that India’s military budget would rise by 7.8 per cent to Rs 830 billion rupees Indian Currency (IC) ($18.99 billion) in the coming year. Chidambaram said much of the funds budgeted would be used to pay for military hardware and supplies already ordered, and to upgrade its ageing arsenal of Russian-built jet fighters and missile systems. India’s annual economic survey last week made a powerful pitch for across-the-board reform such as relaxing rigid labour laws and foreign investment caps to woo investment, particularly from abroad, to boost growth.

Chidamabaram also streamlined income tax bands to ease the burden on poorer workers.

Budget highlights

NEW DELHI: The following are the highlights of the Indian budget for 05-06.

•Budget outlay fixed at Rs 5,143 billion IC ($116 billion).

•Military budget rise by 7.8 per cent to $19 billion.

•Revenue deficit at Rs 953.12 billion IC or 2.7 per cent of GDP.

•Fiscal deficit pegged at Rs 171.99 billion IC or 4.3 per cent of GDP.

•Personal income tax slabs altered.

•Women earning up to Rs 125,000 IC exempted from tax.

•No surcharge on income up to Rs 1.0 million IC.

•Proposal to levy 0.1 per cent or Rs 10 IC on cash withdrawals of Rs 10,000 IC or more from one’s bank account on a single day.

•Nominal increase in the securities transaction tax

•New corporate tax structure with 30 per cent corporate income tax rate for domestic companies plus 10 per cent surcharge

•Customs duty structure to be brought closer to that of East Asian countries. Peak rate for non-agricultural products reduced from 20 per cent to 15 per cent.

•Relief in customs duty to leather and footwear, pharmaceuticals, biotechnology, IT industries.

•National rural health mission to be launched.

•Special package of Rs 4.5 billion IC for highway development in the northeastern region.

•National agricultural insurance scheme’s purview extended to cover kharif or summer crop too from 2005-06.

•Allocation for education sector to increase to Rs 180.33 billion IC.

•Allocation for rural development to increase to Rs 180.34 billion IC.

•Outlay of Rs 300 billion IC for nurturing textile sector in post-quota regime.

•10 per cent capital subsidy scheme proposed for textile processing sector. — HNS