The finance minister has placed his bets on growth through rapid technological development, but critics say he should proceed with caution
FINANCE minister Manmohan Singh
has turned his back on International
Monetary Fund-imposed financial
discipline and given India a growth-oriented budget that pushes for further globalisation of the economy.
But, given the high fiscal deficit and
inflationary trends, there may be many pitfalls ahead.
The budget stresses rapid technological advancement, opens up the country to foreign investment and offers incentives to indigenous research and development through publicly funded institutions. Acknowledging the role of science and technology, Singh clamped a 5 per cent cess on royalty payments for imported technologies that will help to develop commercial applications of indigenous technology.
Department of Science and Technology (DST) officials feel this will encourage projects that have been kept on the backburner. However, K Narayanan of the Institute of Economic Growth (IEG), Delhi, says, "Singh has failed to give private R&D incentives. The largesse has gone to DST." Additionally, Singh has loosened the purse strings for publicly funded science and technology and the department of atomic energy. Allocations for the departments of space, biotechnology, electronics and scientific and industrial research, Project however, remained more or less stagnant.
Singh has hiked the budget for rural development by Rs 2,000 crore - from Rs 5,010 crore - as well as for employment schemes.
Not surprisingly, Singh has many critics. Says former finance minister Yashwant Sinha, "In the late '80s, industrial growth rate was high, exports were booming and price rise was moderate. But soon we landed into the worst financial crisis we have known. Therefore, there is need to move with caution." Former finance minister Madhu Dandavate adds: "This is a GATT-shadowed budget, which will give developed countries liberal access to the Indian market." And, former railway minister George Fernandes says, "It is all a tamasha as elections are round the corner."
But Singh has his supporters, too. Economist Y K Alagh, vice-chancellor of the Jawaharlal Nehru University in Delhi, says: "There is slack in the economy, price rise is moderate and there are adequate foreign exchange reserves. The lowering of customs duties and other incentives will bring in technologies that are more eco-friendly."
The budget has failed to please environmentalists. The outlay for the ministry of environment and forests (MEF) has been increased only marginally.
Pollution control projects have been granted 100 per cent tax deduction. But Gopal Kadekodi of IEG says, "Most polluting industries are established in backward districts and investments in these areas already receive a tax rebate. Instead., disincentives on polluting units should have been considered."
In the non-conventional energy sources sector, there is a shift from subsidised rural energy programmes to commercialisation of renewable energy technologies. The outlay for horticulture, with its emphasis on exports, has been hiked by 42 per cent from Rs 130 crore.
However, what is worrying is the indirect impact of the budget on the environment. Alagh points out there are no efforts to control conspicuous consumption. Said an MEF official, "This was not a clean-up or pay-up budget."
Increased allocation for rural development
in Rs crore
in Rs crore
|Water supply & sanitation||770||951|
Budgetary allocations for environment protection
in Rs crore
in Rs crore
|Ministry of environment anf forests||399||418|
|Forestry & wildlife||199||219|
|Prevention of Ganga pollution||60||73|
Reduction in custom duties proposed in the 1994-95 budget
|Existing rate||New rate|
|Project imports & capital goods||35%||25%|
|Major outlays (in Rs crore)||1993-94
|Science & Technology||339||386|
|Council of Scientific & Industrial Research||343||360|
|Indian Council of Agricultural Research||457||473|
|Indian Council of Medical Research||56||58|
|Ministry of environment & forests (for zoological & botanical surveys of India)||399||418|
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