My Budget: Budget must boost supply to fuel growth

K P Singh / Feb 26, 2008, 00:01 IST

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This will be the fifth Budget in a row for Mr Chidambaram, and probably his most challenging one.

My Budget: Budget must boost supply to fuel growth

This will be the fifth Budget in a row for Mr Chidambaram, and probably his most challenging one. After a dream run over the last four years, blips are suddenly emerging on the economic radar, due to both global as well as domestic factors. Since this could be the last full-fledged budgetary exercise before the general elections, political constraints would also inevitably weigh on his mind.
But the Finance Minister has the responsibility to keep Indian economy's growth momentum going or at least maintain it, despite adverse signals and circumstances.We in India have just begun our growth journey. Lack of demand - leading to recession, as in US - should not be one of our problems.
Despite impressive growth rates, we still have over 220 million people living below the poverty line. If even a small part of that population comes out of poverty, the cumulative impact on demand would be massive to drive away any hint of recession.
Our challenge is to provide enough supplies of everything that a society with rising income can demand, which primarily are the basic necessities of life - more food; better clothes and affordable housing. We have to provide these to our people. Let me now suggest a few ideas how to achieve these goals.

The Finance Minister must provide a few incentives to the economy to keep growing. First of all, a growing economy yields rising revenues, even without raising tax rates. With determined efforts, if the government can contain its own costs, it might be possible to even cut tax rates. Lower tax rates should provide relief and leave more income in the hands of the people. Why not try a bit of reduction in excise duties? This will be an incentive for India's growing manufacturing sector and give a spur to our growth story.

We need to restrain prices. Inflation hits the poor hardest. Worldwide, food prices are rising. We have to adopt supply-side steps to keep food available. This calls for renewed emphasis on development of agricultural sector.
This will call for both a long-term action plan for development of the agricultural sector, as well as some short-term measures to ensure adequate availability. As far as food security is concerned, we cannot compromise on the goal of self-sufficiency. An action plan for ensuring growth and diversification of the agro sector should be an intrinsic element of the budgetary vision.
The Budget has to provide a big push to the infrastructure sector. We are growing at 9% plus, within the constraints posed by our creaking infrastructure facilities. Imagine how fast can we grow if our infrastructure becomes at par with what is available in other countries.
We are estimating an investment of $400 to $500 billion in infrastructure building in the 11th Plan. If we are able to implement these projects, we will surely avoid getting contaminated by global recession by virtue of the multiplier effect of activities and job creation that such investments would generate.
I believe all this is possible, provided the finance minister follows the formula of thinking big and creating surpluses, rather than trying to manage shortages by tinkering with tax rates and token allocations.
Mr Chidambaram needs to keep his focus on pushing long-term reforms by opening the doors for massive inflow of funds to give an impetus to inclusive growth. For this, he has to view himself as a catalyst of not just change, but transformation.
Singh is chairman, DLF

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