Infrastructure ahoy

The Indian finance minister put it very succinctly while presenting the National Budget for 2005-06: “India is not a poor country. Yet a significant number of our people are poor." Chidambaram’s Budget lays out a broad blue print to combat many of the ills plaguing Asia’s third-largest economy – poor infrastructure, lax tax compliance, poverty, high tariffs and also to boost corporate governance. Given the fact that about 260 million Indians live below the poverty line it is only natural that one of the thrust areas of the Budget was eliminating poverty and to give to every citizen the opportunity to be educated, to learn a skill and to be gainfully employed. Even today, around two-thirds of the population is dependent on agriculture. This is only one reason why funding to build up the country's rural infrastructure was also high on the agenda. The more pressing reason is the sorry state of the country’s urban infrastructure, be it highways, ports or airports. That the budget proposes to do something concrete on this by using a portion of India's foreign exchange reserves, currently about $133 billion, IMF objections notwithstanding, to develop roads, ports, airports and tourism is indeed good. The importance of infrastructure for rapid economic development cannot be overstated, as the minister pointed out.
India’s $600-billion economy is targeted to grow 7-8 per cent in 2005-06, compared with 6.9 per cent in 2004-05. As part of the rationalisation of the tax structure, rates will to be restructured, with top rates on personal tax reduced. This is something that will be welcomed by the salaried class. On the whole the budget exercise looks balanced. It is aimed at boosting industrial growth and for this corporate tax rate for domestic firms has been cut to 33 per cent, which has cheered industry and helped push up share prices on the Bombay bourse. The Bombay share index rose 2.19 per cent to a new closing peak of 6,713.86 points post-Budget.
Going by the initial reactions of industry captains, the stock market and also the common man it looks the minister has done a pretty good job given the fact expectations were on the higher side. The focus on the poor by the Congress-led coalition supported by Left parties, which was voted into power last May, is only incidental and need not be seen as pandering to the Communists. Hopefully the budget would assist in reducing the numbers of the poor in the country.

This is an editorial published in Oman Tribune