|"The whole purpose of democratic government is to eliminate poverty."|
These are the words of India's Finance Minister, Palaniappan Chidambaram, as he unveiled this year's budget. In his previous budget, Mr Chidambaram pledged billions of dollars for the poor and to assist farmers. This year his budget continues to take an 'anti-poverty' approach as he provides a further boost to spending on primary education and heath care services.
28th Feb 05 - Rajesh Makwana ~ STWR
The Congress Party was voted into power last May after pledging economic reforms that would benefit the poor and those in rural communities in the world's largest democracy.
Mr Chidambaram continues to pursue this "anti poverty" approach at the expense of a recent law that was implemented to ensure a year-on-year reduction of India's budget deficit.
"I was left with no option but to press the pause button vis a vis the act," he said.
According to the Finance Minister, India's economy grew by 6.9% in 2004 and continues to performing strongly whilst inflation is also well under control. He added.
"Given the resilience of the Indian economy... it is possible to launch a direct assault on poverty".
In the budget, Mr Chidambaram increased spending on primary education to 71.56bn rupees ($1.6bn), increased spending on health to 102.8bn rupees ($2.35bn) and put aside 80bn rupees ($1.8bn) to be spent on building rural infrastructure. In addition, up to 100bn rupees ($2.3bn) will be spent on infrastructure will be sourced by borrowing against the country's foreign exchange reserves.
In further response to the ongoing disaster relief needed as a result of December's devastating tsunami, the finance minister also increased the fund for tsunami victims to 102.16bn rupees ($2.3bn). The budget also set aside additional funding packages for crediting the agricultural sector (30% increase), housing the poor, the Total Sanitation Scheme, improving water bodies, creating jobs in the textile industry, a new package for the sugar industry, providing telephone connections to 66,820 villages and setting up a new fund to deal with flood control and erosion in Eastern parts of UP, Bihar, West Bengal, Orissa and the North-East on account of floods in Bramaputra and Ganga.
In what has been described as a "people's budget" Mr Chidambaram also reduced levels of income tax for low earners and raised income tax thresholds.
The budget comes at a time when Mr Chidambaram is under increasing pressure from the Communist parties to focus on increasing social spending. They are also hostile to measures seeking to increase foreign investment and allow companies to hire and fire employees at will.
It is too early to tell how long India can continue to implement budgets that help to redistribute resources to poorer sections of society, given the restrictions posed by their budget deficit. For now, however, the budget is rightly seen as a needed boost for the ordinary citizen, more than a quarter of whom are currently living in poverty.
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