Budget 2001-2002

Speech of Shri Yashwant Sinha

Minister of Finance

Sir,

1. I rise to present the Budget for the year 2001-2002.

2. I do so in all humility. The challenges we face this year are awesome, made more so by the tragedy and devastation caused by the Gujarat earthquake. I hope I shall get the understanding and support of the whole House in my endeavour to meet these challenges.

Economic Context

3. The Indian economy has continued to exhibit both growth and resilience that have characterized its performance in the past few years. Overall economic growth this year is expected to be about 6 per cent despite a series of unexpected setbacks. We have had a second successive year of irregular monsoon resulting in low agricultural growth. World petroleum prices have continued to stay at high levels placing strains on the economy as a whole, and have led to a significant increase in inflation over the past year. Fortunately, despite the increase in energy prices, the prices of essential commodities, and of manufactured products as a whole, have remained stable. Inflation, excluding energy, was around 4 per cent during the year. The economy remained secure with record levels of foreign exchange reserves and public food stocks. The creditable export performance recorded last year improved further: exports grew by over 20 per cent in dollar terms in April-December 2000.

4. It is now 10 years since economic reforms began in 1991. During this period, the economy has grown at an average rate of 6.4 per cent per year since 1992-93 compared to the 5.8 per cent recorded in the 1980s. Poverty has fallen from 36 per cent in 1993-94 to 26 per cent or less now.

5. While economic reforms have placed the country on a much more secure and sustained growth path, we still have some serious concerns and cannot afford to be complacent.

1. Agricultural reforms have been inadequate and our agriculture continues to be subject to the vagaries of the monsoon.

2. Despite major industrial sector reforms, industrial growth has not accelerated to the double-digit level as expected.

3. Inadequate fiscal adjustment has remained the most intractable problem over the past decade.

1. Interest payments now constitute over 69 per cent of the Centre’s tax revenues.

2. Subsidies continue to increase to unaffordable levels and do not necessarily reach the deserving beneficiaries.

3. The pension liability of the Government is becoming onerous.

     4. Public investment in infrastructure and social sectors is inadequate due to falling total public sector savings.

     5. Private investment is constrained due to high real interest rates and inadequate infrastructure.

Budget Strategy

6. Thus, despite the many achievements of economic reforms over the past decade, much remains to be done if we have to achieve our full potential. There is urgent need to further deepen reforms to set the stage for higher growth over the next decade. We have to intensify our effort in fiscal adjustment so that the generations to come are not burdened by our borrowing excesses. The economy has achieved significant acceleration in growth over the last 20 years. Our aspiration must be to achieve still higher growth in the next 20 years.

  7. The broad strategy of the budget, therefore, with this objective of growth in mind is to ensure:

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

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

3. Human development through better educational opportunities and programmes of social security.

4. Stringent expenditure control of non-productive expenditure, rationalisation of subsidies and improvement in the quality of Government expenditure.

5. Acceleration of the privatisation process and restructuring of public enterprises.

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

Agriculture and Rural Development

8. As I have noted, reforms in the agriculture sector have been inadequate and must be speeded up. The Government has already announced the first ever National Policy in Agriculture.