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Sinha's strategy - reforms on the top priority, sheds on expenditure Wednesday, February 28, 2001

NEW DELHI: The Union Budget for 2001-02 attempts to accelerate growth through stringent control of non-productive expenditure, rationalisation of subsidies, intensification of infrastructure investment and acceleration of the privatisation process.

Presenting the Budget, finance minister Yashwant Sinha said the Indian economy had continued to exhibit both growth and resilience over the last few years.

BUDGET STRATEGY

Speeding up of agricultural sector reforms and better management of the food economy.

Intensification of infrastructure investment, continued reform in the financial sector and capital markets, and deepening of structural reforms through removal of remaining controls constraining economic activity.

Human development through better educational opportunities and programmes of social security

Stringent expenditure control of non-productive expenditure, rationalisation of subsidies and improvement in the quality of government expenditure

Acceleration of the privatisation process and restructuring of public enterprises.

Revenue enhancement through widening of the tax base and administration of a fair and equitable tax regime.

AGRICUTLURE AND RURAL DEVELOPMENT

The government has already announced the first-ever national policy on agriculture. The provision of adequate credit flow is critical for agricultural production. Total credit flow to agriculture through institutional channels of commercial banks, cooperative banks and regional rural banks is estimated to have reached a level of Rs 51,500 crore this year, an increase of about 15 per cent over last year.

It is expected to increase to Rs 64,000 crore in 2001-02 representing an increase of 24 per cent. In order to ensure continued healthy growth of the agricultural sector, the finance minister proposed a number of steps:

To help the states, the interest rate charged by Nabard will be reduced from 11.5 per cent to 10.5 per cent. The corpus of the Rural Infrastructure Development Fund (RIDF) VII will be increased from Rs 4500 crore to Rs 5000 crore next year.

Banks will be asked to accelerate kisan credit cards to cover all eligible agricultural farmers within the next three years. The premium burden on this account will be shared by the card-issuing institutions.

Nabard and SIDBI were asked to link one lakh self-help groups during the current year. A micro-finance development fund has also been set up in nabard with contribution of Rs 40 crore each by Nabard and RBI.

Nabard was permitted to issue capital gains tax exemption bonds last year. This has helped Nabard to mobilise more than Rs 1000 crore at lower than normal interest rates thereby reducing its cost of funds. This tax exemption would continue.

The resources from the Watershed Development Fund set up in Nabard would be used to promote people's participation and also enable water users' associations to implement, operate and maintain irrigation schemes.

In 1999, a credit-linked subsidy scheme for the construction of cold storages for perishable commodities was announced. The finance minister has announced the extension of this scheme to cover rural godowns also. The loans would carry an adequate long-term repayment period and would enable individuals, cooperative societies and others to build godowns.

This scheme will enable small farmers to enhance their holding capacity in order to sell their produce at remunerate prices. Nabard will reduce its rate of interest from 10 per cent to 8.5 per cent. Small farmers will particularly benefit from this scheme by avoiding distress sales.

A sum of Rs 61 crore has been provided for the centrally sponsored scheme on ''on-farm water management for increasing crop production in eastern India''.

RURAL ROADS

A new scheme, the Pradhan Mantri Gramodaya Yojana (PMGY) was launched with the objective of undertaking time-bound programmes to fulfil the critical needs of the rural people. A central allocation of Rs 2,500 crore was provided for 2000-01. Half of the diesel cess is earmarked for development of rural roads.


RURAL ELECTRIFICATION


A package of initiatives has been announced to improve power distribution in rural areas. The initiatives include extension of assistance to the states for village electrification works under the PMGY, stepping up credit support from the Rural Electrification Corporation to SEBs for speedy electrification of Dalit bastis, households of Scheduled Tribes and other weaker sections of society, improving the quality of power supply in villages and augmentation of distribution networks in rural areas and earmarking a sum of at least Rs 750 crore for rural electrification works.


MANAGEMENT OF THE FOOD ECONOMY


To give an enlarged role to state governments in both procurement and distribution of foodgrains for PDS in their respective states, instead of providing subsidised foodgrains, financial assistance would be provided to the state governments to enable them to procure and distribute foodgrains to BPL families at subsidised rates. Details for operationalising these arrangements will be worked out in consultation with the state governments.

The government proposes to review the operation of the Essential Commodities Act, 1955, and remove many of the restrictions imposed on the free inter-state movement of foodgrains and agricultural produce and also on the storage and stocking of such commodities.


INFRASTRUCTURE


POWER: The importance of power in fuelling economic growth cannot be over emphasised. The total cost to the state electricity boards of implicit subsidies amounts to about Rs 36,000 crore this year. After accounting for cross-subsidy and state subventions, actual commercial losses of all SEBs combined are estimated to be about Rs 24,000 crore.

The total dues owed to central government utilities by SEBs and others now amount to over Rs 25,000 crore. In order to help accelerate the reform process in the power sector and to unify all existing central legislations in the sector, the plan outlay for central sector power utilities is being raised from Rs 9,194 crore this year to Rs 10,030 crore for 2001-02.

HIGHWAYS: The National Highway Development Programme (NHDP) represents a new road vision for this country. The key to government's success in accelerating the road development programme lies in its bold policy of levying a cess on petrol and diesel as a user charge for road usage. The cess has paved the way for integrated road development in the country, including village roads, district roads, state roads and national highways. Rs 962 crore from the cess fund is being made available to states for state roads. The total plan outlay for this sector is being enhanced by 93 per cent to Rs 8727 crore in 2001-02.

COMMUNICATIONS: Having recognised the imperatives of technological change in this area, the government proposes to introduce the Convergence Bill to cover telecommunications, information technology and information and broadcasting sectors in an integrated manner.

Successful investment is being enabled by the setting up of economic tariff levels. The infrastructure sector will be enabled to raise long-term funds, particularly with the opening of the insurance sector.

TEXTILES: The finance minister has announced a textile package. At least 50,000 new shuttleless looms and the modernisation of 2.5 lakh plain looms to automatic looms are expected to take place by 2004 through funding from the Technology Upgradation Fund Scheme (TUFS). The Budget provision under TUFS is being raised from Rs 50 crore this year to Rs 200 crore in the next year. The Budget allocation for the ministry of textiles is being enhanced substantially from Rs 457 crore in 2000-01 to Rs 650 crore in 2001-02.


HUMAN DEVELOPMENT

Recognising the need for increasing investments in social sectors, the plan allocation for the ministry of health and family welfare has been stepped up from Rs 4920 crore to Rs 5780 crore. This includes an allocation of Rs 180 crore for HIV/AIDS control programme.

A new scheme for strengthening the state drug testing laboratories and pharmacies has been announced to provide Indian systems of medicine and homeopathy benefits similar to the pharmaceutical industry.

An integrated national education programme - the Sarva Siksha Abhiyan - has been launched for universalising elementary education and a national mission constituted with the Prime Minister as chairman. All existing schemes on elementary education will converge with this scheme after the Ninth Plan and it will cover all districts in the country by March next year.

 

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