Formal Budget exercise on; expectations of growth-oriented budget

New Delhi, Dec 29 (UNI) Finance Minister P Chidambaram today formally launched the Budget exercise by holding consultations with agriculturists and trade union leaders amidst a general belief that he will do nothing to play a spoilsport in the ongoing growth and stock market party.

Mr Chidambaram is scheduled to meet economists tomorrow, and captains of industry on January 9, as part of the pre-budget exercise.

The hope that the going will be good as far as the Budget 2007-08 is concerned emanates from the favourable circumstances that the economy is placed -- tax collections at a record level, three years of a growth rate of eight per cent plus, high corporate earnings, higher outflows and inflows of Foreign Direct Investment and sustained inflows of Foreign Institutional investment, an ever increasing Sensex, mounting foreign exchange reserves, and agriculture growth likely to be better than expected earlier.

Given the complusions of politics, the Budget will also continue with initiatives aimed at reducing the levels of unemployment, rural development and health and education.

During his pre-Budget exercise, Mr Chidambaram will get an opportunity to get a feel of the thinking of various groups, which will enable him to finetune the UPA government's policies.

It is by now well-understood that to sustain an eight per cent plus GDP growth, it is important to double the growth rate in agriculture from about two per cent at present to four per cent.

Besides, the suicides by farmers in various parts of the country have shaken the conscience of country, which swears by its democracy.

The agriculturists who met Mr Chidambaram today stressed the need for hiking public investment in irrigation, higher Minimum Support Prices for key agricultural commodities and thrust to agricultural exports.

The trade unions spoke of rising prices, social security for the unorgansied sector, better job opportunities, a better deal for the oustees, especially with regard to setting up Special Economic Zones, and fears of lowering of interest on Employees Provident Fund.

The unions also launched a virulent attack on the government policies, saying these were impacting adversely on the vast multitudes of people. The economic policy regime has only created islands of prosperity, while plunging the majority of people into the quagmire of impoverishment and poverty.

But Mr Chidambaram is unlikely to throw a spanner into the growth party, as this is one of the major achievements of the the UPA government.

Known to be a reformer, it is difficult to perceive that Mr Chidambaram will annoy India Inc.

But the Finance Minister's commitment to eliminate tax exemptions which are in region of Rs 1,58,661 crore is also well known. The truth, however, is that powerful lobbies are always at work to scuttle such moves.

The arguments that are often buttressed by such vested interests are threats of closure of industrial units, the justifications for their continuance in terms of their peculiar needs and woes of those who will lose their jobs, especially the very poor.

As an exercise in expenditure control, the government has been workng to eliminate Centrally-sponsored schemes which have outlived their utility.

A peculiarity of the coming Budget is that this will be the first of the Eleventh Five-Year Plan and the Planning Commission has been putting pressure on the Finance Ministry for front-loading of expenditure during the first few years to maintain the momentum of the economy.

The pressure from the Left parties would make it a formidable task for the Finance Minister to announce any steps relating to disinvestment or make any fast moves relating to financial sector reforms.

For the other area of thrust of government policies, namely rapid development of infrastructure, reliance will be on roping in private equity funding, tapping institutional finance in India and abroad and widening the ambit of Public-Private Partnership for delivery.

All in all, Budget 2007-08 is likely to continue to provide impetus to growth and social sectors, while not giving up the good old principles of fiscal prudence.

UNI GS CS KN1548