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India boosts defence, agriculture spending
 NEW
DELHI: India’s finance minister targeted a return to 9.0 per
cent economic growth ‘at the earliest’ in a budget speech on
Monday that suggested the country had
seen off the
worst of the
global financial
crisis.
But in announcing increased funding for farmers and poverty
alleviation programs, Pranab Mukherjee also warned that
India’s soaring fiscal deficit would continue to grow in
2009-10 to 6.8 per cent of GDP.
The estimate was far higher than the 5.5 per cent put
forward by the government in an interim, pre-election budget
in February.
The initial
stock market reaction however was extremely negative,
with the benchmark 30-share Sensex falling 659.55 points
or 4.42 per cent to 14,253.3 in intra-day trading.
The deficit had ballooned to 6.2 per cent in the year to
March 2009 – more than double the government’s target of 2.5
per cent and the highest in nearly two decades.
‘The first challenge is to lead the economy back to the high
growth rate of 9.0 per cent per annum at the earliest,’
Mukherjee told parliament as he presented the 2009-10
budget.
‘The second challenge is to deepen and broaden the agenda
for inclusive development,’ he said.
India’s economy grew by 6.7 per cent in the year
ended March 31 – the slowest rate since 2003 and
down from nine per cent a year earlier, as the
effects of the global economic downturn hit home.
In its annual Economic Survey presented to
parliament last week, the finance ministry had
predicted that GDP growth could exceed 7.0 per cent
this year.
But it stressed that the figure was dependent on a
recovery in the global economy as a whole, and that
of the United States in particular.
Mukherjee hiked the defence budget for the financial
year to March 2010 by 24 per cent to 1.42 trillion
rupees (28.4 billion dollars) to partly fund a
programme to modernise India’s 1.23-million-strong
military.
The size of the increase had been flagged in a
pre-election interim budget in February.
In addition to the defence budget, Mukherjee
sanctioned an additional 143 million dollars for the
paramilitary and said he will also spend 456 million
dollars more to strengthen border security during
the current fiscal year.
‘Significant augmentation in the strength of the
paramilitary forces is being done,’ Mukherjee said,
adding the government will build 100,000 houses for
troopers to ‘boost morale’.
In a bid to stem discontent of retired soldiers from
spilling into the ranks, he promised an attractive
pension programme for 1.2 million ex-military
personnel who in recent months had taken their
agitation to the streets.
Manmohan Singh said the security modernisation
programme was crucial to the unhindered development
of Asia’s third largest economy.
‘Law and order is a pre-requisite to sustainable
development... so the modernisation of our
intelligence is a must,’ Singh told Doordarshan
national television.
India, the biggest weapons buyer among emerging
countries and which has imported military hardware
worth 28 billion dollars since 2000, plans to sign
further contracts estimated at up to 30 billion
dollars in the next few years.
But strategy expert Uday Bhaskar noted the lion’s
share of the funds will be taken up by wages and
pensions and said: ‘The current defence allocation
may look good but it will not enhance the capability
of the military in any way.’
Mukherjee warned that the push for a return to
higher growth would have to be balanced against the
need for ‘financial austerity.’
Analysing the impact of the global economic crisis
on India, he said he believed the ‘the two worst
quarters are behind us’.
‘But we cannot afford to drop our guard,’ he added.
The initial stock market reaction however was
extremely negative, with the benchmark 30-share
Sensex falling 659.55 points or 4.42 per cent to
14,253.3 in intra-day trading.
Analysts said Mukherjee’s speech, which promised
increased spending for farmers and the poor, had
failed to provide a clear reform path for boosting
growth and reducing the deficit.
‘There is nothing in the budget which is specific to
help boost growth. It is a complete disappointment,’
said Apurva Shah, head of research with brokerage
Prabhudas Lilladher.
After Mukherjee’s speech, Prime Minister Manmohan
Singh acknowledged that it was a ‘primarily rural
development-oriented budget.
Courtesy: The DAWN
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Pakissan.com;
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