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Last Updated: Tuesday, 13 July, 2004, 10:54 GMT 11:54 UK
Will India's new budget boost the economy?
Women fetch water in North India
The economic strategy behind the new Indian government's first budget is to empower the people, especially the poor, with access to education and health.

Finance Minister Palaniappan Chidambaram has had to juggle populism and prudence - India's deficit needs to shrink but spending on public services must go on.

Economic growth was strong and healthy under the BJP but poorer voters swept them from power as they didn't feel part of "India Shining".

In response to the change, shares on India's benchmark Bombay Stock Exchange fell by more than 50 points.

Do you think the Congress-led government's budget will deliver where the BJP failed? Has the new government got its priorities right? What impact will their first budget have on the Indian economy? What do you predict for the future?

This debate has now closed. Thank you for your comments.

Your comments:

The government must realise that the Indian government does not work very well (corruption, inefficiency) and throwing more money without effective implementation capability will be tragic for India, it is must tap into the instinctive entrepreneurialism of the Indian people and allow the private sector to take a wider role in the development of the economy in terms of schools, public health and infrastructure. That only 20 million people pay tax in India is astonishing - this is appalling and must be tackled and fixed.
Prashant, London, UK

It's comforting to finally witness a budget which, at least on paper, offers hope to the illiterate and impoverished masses of India. A question that must be asked is what steps will this new government take to reform a rampantly corrupt system so that the government can work in unison for the betterment of India rather than be viewed as a hindrance?
Raj, Toronto

The real economics lies in creating the wealth and not distributing others' wealth
Ramya, Netherlands
Allocating more for social causes is always welcome. However it has given more money in the politicians hands whose track record is well known. They also conveniently forgot to widen the tax base, aggressive rationalization of tax structure, and steps to boost the manufacturing. The real economics lies in creating the wealth and not distributing others' wealth.
Ramya, Netherlands

Just by increasing the budget for education, people can not be educated. The greater task is implementation. Some of the states performed well, and some did not under the same central government. Government should invite private sector to educate people in the rural areas, they will surely show a better result. Most of the states property are now really a burden on people, we must have to get rid of that.
Samit Barai, New Delhi, India

What India needs at the moment is to achieve a balance between the capital building measures and social development. The BJP government presented a pro-capitalist budget, unlike the present government, which has a pro-socialist. These two budgets are complementary to each other, not contradictory.
Shrinivas G, Trivandrum, India

This new budget takes into consideration the most important fact staunch Indian capitalists often ignore. Poor rural families still form the backbone of the Indian economy and will for years to come. It is time we Indians view them as an instrument of wealth creation and seize this opportunity, for it may never present itself again. In response to the budgetary allocation for defence. The increase is necessary as the world becomes increasingly multi-polar, and the need exists for India to carve itself a strategic niche.
Rajiv, Mississauga, Canada

This budget is a step in the right direction
Arul Pandian, Coimbatore, India
There can be no social or economic improvement in India unless the Government address the need and concern of the majority who are between poor and lower middleclass. The gap between the haves and the have-nots has to be bridged. This budget is a step in the right direction.
Arul Pandian, Coimbatore, India

Rampant corruption, ministers facing trial, and parallel economy have been the root causes of India's fiscal and other problems. No clear steps have been taken to weed out these obnoxious causes, either directly or indirectly. Transparency and accountability is not built into the system. It will be very easy next year to declare failure of yesterday's budget.
Anuj Bahl, Delhi, India

This government needs to take extreme measures to collect income tax from a large percentage of the population. Government needs to have money to make difference in lives of poor and middle class families. They need to change the face of their cities as well as rural areas. Send clear messages to those who don't pay taxes and reform the government process and get rid of adapted British bureaucracy.
Vikram Jani, Bombay, India

This is the opposite of Ronald Reagan's "Trickle-down Theory" a.k.a. "Voodoo Economics". Putting wealth into the hands of the poor sustains democracy and creates the greatest amount of new wealth for all, yet keeping it with the wealthy sustains Totalinarism. India will eventually surpass the United States in wealth and freedom.
David Stephen Ball-Romney, Seattle, USA

They need to get the black-market money into the main circulation
Rahul Khosla, USA
The finance minister should have thought of a way of roping in more people to pay income tax, one way of raising revenue for this populist budget. Even if the tax paying population goes up by 5% the revenue generated would be tremendous. The service class has carried the burden for too long, they need to get the black-market money into the main circulation.
Rahul Khosla, USA

It looks like there would be net gain to the Indian economy by these budget proposals. The plan to eliminate Revenue Deficit by 2008 is a good move. Focus on primary education would help boosting the economy in the long run. And moreover he has made some move to make the climate investor friendly, particularly FII. The thrust on reducing the fiscal deficit would also help boost the economy. Overall this budget has a substance to boost the economy.
Ajay Rambhad, Baltimore, MD, USA

India can improve the economic and social indices when all the sections of society are given a fair deal. This budget shows that direction.
Prabhu Chellamuthu, Glasgow, UK

Focus has been shifted from the 30% urban to 70% rural people which was over due. A positive shift for a round growth of the economy
Amrik S Gill, Boston USA

Double digit growth in GDP and we wonder whether the economy will be boosted by the budget? A sense of perspective please. Fear of 'overheating' is more relevant!
ML, London, England

It also neglects the middle class people
Abhi, Liverpool, UK
This budget no doubt will prove some relief to the poor section of the Indian population but what about it's economy where it's industries plays vital role as this budget not favourable to this sector as it was during NDA government moreover it has also neglect the middle class people of the Indian society which also plays an important role in it's development.
Abhi, Liverpool, UK

By just increasing the amount allocated to education won't solve the problem of illiteracy in India. The money would any way be lost in red tape and rampant corruption. Moreover you also have the problem of teacher absenteeism. Things could only be changed by introducing education vouchers to the parents. These vouchers can then be remunerated by the teachers at the end of the month. The parents will have the right to refuse these vouchers if the teacher has not been regularly attending the school. This would make them accountable to the system. Also more private schools need to be encouraged where quality of education is much higher than that of state run schools.
Nishant Aggarwal, Pune

It is a clear message to BJP and its allies that without the people under poverty line support No government in the world can survive and the recent election has proved it. Congress is the only choice for India and it once again proved it by this budget.
Joseph Benher, Toronto, Canada

A bundle of mutually incompatible goals
Mohansingh, India
A bundle of mutually incompatible goals - increasing social and defence expenditure while not raising revenues to match the outgoings; the pie in the sky promise of containing the budget deficit to 4.4 percent of GDP while not implementing measures that are likely to achieve such an objective.
Mohansingh, India

Taking from the rich and giving to the poor will drive the rich away. India needs to lower taxes to be attractive to investors. The government should not run industry - that should be left to the experts. And again, Socialism does not work!
Rahul Ratan, Texas, USA

The Indian economic growth will decline and this budget is not favourable for the development of industrial sectors.
Kumar Saminathan S, Erode, India

India must continue its military programme and in the meantime they also need to address the issues of growing population. One must do is developing road network, it is very essential to country like India. I hope the new government will concentrate on this project.
Shan, London

I do know that changing the tax collection in one budget year is impossibility, but I was hoping to hear more on VAT
Raghu, Boston

I like the fact that the govt is trying to cut the deficit to 4.4%, but the tax system is still not getting the change it needs. There is a lot that can be done in the system then raising surcharges. I do know that changing the tax collection in one budget year is impossibility, but I was hoping to hear more on VAT, which would have at least bought in more people into contributing to the coffer when they buy goods.

There is an paradox here, giving healthcare is going to help people live longer and education make them wiser, but with such a skewed tax system is going to keep more people away from investing which is going to generate the much needed jobs. One food for thought, a lot of corporations are moving to countries with lower taxes (as the taxes in the West rise) to save money and raise profits and India can do well by presenting an acceptable taxing system to attract them.
Raghu, Boston, USA

This budget seems to be a mass budget for the masses - different than a class budget for the upper classes like the BJP did to represent the upper castes i.e. mainly the Brahmins.
Avinash, Madras, India

The Budget proposal is great! But unless this government in successful in cutting on red-tape and corruption, the condition of one billion Indians will hardly change. Nearly half of the money kept for domestic investment in infrastructure projects will gobbled up by congress "netas" and rest by the useless govt employees. India only survives by taxing and exploiting the hardworking middle class. I really do not have any hopes from this govt, unless it restarts the dis-investment initiatives of the previous BJP govt.
Mandeep Bamal, Leuven, Belgium

I don't think any government will succeed until corruption is addressed. To help the poor congress must eradicate corruption. For the past 55 years all elected governments have made pledges to help the poor. When a rupee is released from government to the poor, by the time the poor person gets it there is only a quarter left. The rest has been taken by red tape and corruption! This is a known fact and known to all Indians.
Reg, India/UK

The first budget of the new government seems to have addressed this thorny issue in a novel way
M Bashir Bharadia, Mombasa

Some Indian leader (If I am not mistaken, it was Indira Gandhi) once said, "In India there is enough for everyone's need but not enough for everyone's greed" or words to that effect. That's precisely the problem in India, or for that matter, in most of the Third world countries including Kenya. As a result, in these countries, the rich keep on getting richer and the poor, poorer. The first budget of the new government seems to have addressed this thorny issue in a novel way. Let's hope the move heralds in a new era for India and turns out to be worthy of other Third world countries taking a leaf from.
M Bashir Bharadia, Mombasa, Kenya

They have truly lived up to helping the poor and needy this time.
Arun, Lund, Sweden

This budget is a good one and will empower poor majority population of the country. Hats off to Chidambaram for this pro-poor budget.
Srinivas, Bangalore

If India wants to catch up with the West before it's too late, following the BJP system is probably the better alternative. However this would obviously come at the expense of the poorer people. India has to ask itself whether humane growth will be fast enough to stop India from falling behind.
Raj, London

A single person can shortly simulate an economy of such a large country is just a myth. The fruits of any economic policy can be seen only in 10-20 years. And I am happy there is no policy shift from the previous governments.
ST, Ooty, Tamilnadu, India

The service tax increase by 2% is not going to be taken kindly. Everything is going to cost more! The tax relaxation on the equity related MFs is long awaited. The hike in defence budgets seems unnecessary. The tax exemption limit hike is good but the slabs also should have been changed. On the whole, a budget which will push up cost of living.
Manu Srinivasan, Pune, India

What will this government do to increase India's tax base?
Rustam Roy, England

An interesting balancing act, but the most important question is unanswered. What will this government do to increase India's tax base? It is astonishing that only about 2 - 3% of the population pay income tax. Anyone from India is aware of the large-scale tax evasion that is common-place amongst India's high earners and the government could immeasurably increase its credibility with middle class and poorer voters by aggressively seeking to improve this imbalance. Quite apart from addressing a major crime, it would also release large amounts of funds and may facilitate a reduction of the higher-rate income tax rate, which is too high in relation to the sector of the population it targets.
Rustam Roy, England (ex-India)

No amount of increase in public spending on education and health will have a serious effect, till we improve our delivery systems, remove rampant corruption, and make people accountable. Instead of raising more money through education and indirect taxes, the finance minister should concentrate on effective implementation of the already existing schemes.
Tushar, Bangalore

More money for poor, a good advertising campaign by the government but will it make any difference in the life of an ordinary Indian? 18 % rise in defence budget could be shifted to further development. Actually both India and Pakistan need 50% cut in their defence budgets.
Tanvir Ahmed , London, UK

It's extremely disappointing to see the defence spending go up further. And not a single voice raised against it. What is hugely disappointing is not the massive defence budget but the general consensus of a belligerent population.
Owais Aftab, Delhi

The budget has been satisfactory. There is a very comforting presence with the Congress in as they try and stitch up the seams and rips in the Indian economy. Invest now and reap the harvest in the medium-term Sensex-fearers!
Romil Timbadia, Dublin, Ireland

This is great news for India on quite a few fronts - and today the stock market thinks so as well! This will allow for the green revolution that has benefited Bengal and Kerala to benefit farmers across India while still spreading a market-driven entrepreneurial spirit across the country. It also a sends a clear message to China and Pakistan to negotiate fairly. Now, only if they could collect all those taxes.
Raja Choudhury, New York, USA

This is a middle-path budget. Government has to improve the tax collection system because most of the small and medium businesses never pay tax. The government should also pay urgent attention to clean the corrupt income tax department.
Anirban Ghosh, Montreal, Canada

Because in the poor Indian resides the soul of India
Sasikanth, Zurich

The new government's priorities are surely in the right direction. India needs to address the problems of the starving poor masses. The immediate challenges for India are Poverty elimination, Aids, drinking water and modernisation of the primary and secondary education. The new government under the able economists, Manmohan Singh and P Chidambaram have no reason to fail in delivering its promises of sustained development and an empowered poor. Because in the poor Indian resides the soul of India. The most successful Indian always comes from the poor and middle class of India. The future will be fantastic. A healthy and well educated India, where the most common man can dream of making it big.
Sasikanth, Zurich

Yes I think it will benefit the poor. India has to focus on social sectors and a major overhaul of its tax system. India spends 0.9 % of its GDP on public health services while spending 2.5% on the military. This must change.
Sandip Savasadia, Karlskrona, Sweden


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