|Speech of Shri
Finance Minister, Government of India
27th February, 1999
I rise to present the budget for the year 1999-2000.
2. For the first time after Independence with the enthusiastic support of all political parties in Parliament, it has been possible for me to discard the long standing tradition of British Raj of presenting the budget at 5 PM. A new beginning is being made today as I present the last Budget of 1900s. I assure you this is not the only new feature. There are many more in this budget.
3. The decade of the nineties has witnessed extraordinary changes. It began with the collapse of the centrally planned economies; it is ending with market economies facing a serious crisis.
4. The year 1998 particularly has been a year of unprecedented global turmoil. The East Asian financial crisis took a heavy toll of important economies in the region and spread to other countries. Japan continued in recession and in August 1998 severe crisis afflicted Russia. By January 1999, the contagion had spread to Brazil triggering massive capital flight and a steep depreciation of the currency. World output growth dropped below 2%, the growth of world trade decelerated sharply, commodity prices fell steeply, currencies were savaged and capital flows to developing countries declined sharply.
5. In India, we had to contend with the additional challenge of economic sanctions imposed on us after the Pokhran nuclear tests. While we have not remained unaffected by these developments, we have reasons to be satisfied at the way we have withstood the impact of these challenges. Despite the hostile economic environment, our GDP growth in 1998-99 has accelerated to 5.8% compared to 5% last year. Our farmers have led the way with 5.3% growth in agriculture and allied sectors. Since the beginning of 1998-99, we have added $2 billion to our foreign currency reserves as of February 23, 1999 and we have successfully curbed undue volatility in the forex market. The current account deficit in the balance of payments is estimated at a modest 1.4% of GDP compared to 1.6% in 1997-98. Although inflation had risen sharply during the year, we have succeeded in bringing it down to below 5% now. All this is described in detail in the Economic Survey presented to Parliament a few days ago.
6. However, there is no room for complacency. The challenges before us, both international and domestic, remain grave. The fiscal and revenue deficits of both Centre and States are still too high and are undermining our ability to bring down interest rates, stimulate investment and growth, curb inflationary potential, generate resources for priority, non-interest expenditure needs and raise exports.
7. Above all, despite our continuing concern year after year, we have made only a limited impact on the problems of poverty and unemployment. The various schemes of the Government in this area lack focus and convergence. The delivery systems need to be cost effective and community based. The fruits of economic development should largely reach the poor and the vulnerable specially the Scheduled Castes, Scheduled Tribes and Other Backward Classes who, in turn, need to be empowered fully. Without this, I am afraid, our planning will be devoid of any direction.
8. The broad strategy of this Budget therefore is six-fold:
Begin a medium-term process of revenue and fiscal deficit reduction, along the lines indicated in the Ninth Plan, which will free more resources for productive investment and growth and contain inflation.
Undertake a major reform of indirect taxes to promote productivity and employment.
Deepen and widen economic reforms in all major sectors and accelerate internal liberalization to release the productive energies and creativity of our farmers, manufacturers, traders and service providers.
Safeguard the economy from external shocks, revive exports and stimulate the domestic engines for growth revival.
Strengthen the knowledge-based industries and thus prepare ourselves for the challenges of the new millennium.
Last but not the leastRevitalise and redirect public programmes for human development, encompassing food security, health care, education, employment and shelter. Their focus should be on empowering the poor and the weaker sections, especially those belonging to scheduled castes, scheduled tribes and other backward classes.