The Indian Budget

This budget is a good long term look at our economy from Mr Chidambaram. Recognizing that the the Indian Industrial and Service economy is rolling along, he has wisely left it well alone. I am sure he is thinking ‘ let’s see how it goes for the next year and then we can do some corrections’. I personally disagree with those that are panicked about inflation. Inflationary tendencies of up to 6 % have historically been an essential part of economic growth, provided it is backed by corresponding increase in productivity.


But I do believe that Finance minister MUST recognize that the underlying growth in our economy has been fueled by the middle classes and he should have increased the exemption limits substantially. Squeeze the middle classes too tight and you loose a fundamental driver to the economy.
Rightly so, though, Mr Chidambaram has recognized that it is time to concentrate on those of our countrymen that are getting left behind in India’s rapid economic growth. This is not just a political or a social move. It is an important recognition of our biggest long term economic problem.
A large part of the ‘India Hype’ is based on our extremely young demographics. Now and more so in the next 10 years. Yet almost 50% of our children have extremely poor education and suffer from malnutrition. And if we do not address that problem now , our demographics will be our undoing. A restless, uneducated young population of over half a billion will create social unrest that could destroy our economy. Mr Chidambaram therefore has rightly turned his concentration toward improvement in Health and Education.
Over the years the Indian economy has seen a substantial fall in the GDP contribution of the agricultural sector, while 70 % percentage of our population continues to be rural. This is leading to a dangerous urban/rural divide. While this Budget has rightly concentrated on bringing relief/investment to the very important agricultural sector, but the Finance Minister must create more alternate opportunities withing the rural sector. The spread of broadband access to everyone in the rural sector will encourage diversity in rural employment, as well as encouraging computer based interactive classrooms for children.
That to me is where the budget fails most. The Finance Minister has not encouraged investment in Technology as an aid to solve the problems of poverty, education, health and education that he is targeting. And Water Resource management. The budget resource allocation continues to rely on techniques based on historical systems that have proven incapable of catching up with our increasing population and rich/poor divide.
shekhar

22 Responses to “The Indian Budget”

  1. Himanshu says:

    Hi Shekhar,
    I definitely agree that more investment in technology is required to reduce the urban/rural divide. A few days back I attended a presentation by a non-profit organization called the ‘The Hunger Project’ and they are working mainly in rural and some startling facts came out: 1) India at any time has 40 million tonnes of food surplus which often sits and rots in big warehouses. A proper technology driven distribution system can go very far in feeding the 360 million hungry people in India and this is just not being done.
    2) Often schools in villages are only upto 8th standard and most kids especially girls are made to drop out after that, so like the US we definitely need to have free/mandatory education till Class XII. Most importantly the perception in the mind of the village people has to change that education is valuable for life and increases opportunities, so that the kids are not made to drop out to work in the fields instead. This comes back to food again – if they had enough food to start with most problems would be solved. Broadband in villages is beginning in a small way and will greatly reduce the divide and make then more aware of opportunities, and motivate them internally to break free from their situation.
    3) Health issues also arise mainly by malnutrition, not enough doctors in villages, lack of knowledge of basic immunization etc. Again awareness and food are the key factors here plus govt. should try to use the Canadian Healthcare model in a small way to give free drugs. Health camps are held in villages but it is still quite small, plus most importantly the villages have understand what the concept of money making is – Chidambaram always says that I always tell people in villages to take 5-10 thousand rupee loan(from a co-operative or anywhere they can get from) and start a small shop, so some level of enterprise is also required at the grassroots level (i.e. to create their own opportunities) for them to earn more money and afford better food/healthcare.
    Awareness can also hopefully help them to have smaller families, which is one of the main issues of lack of enough food/money to start with.
    The Hunger project says that the basic cause of the problems in the villages is the condition of women and the girl child, and they have made that their top priority i.e. to get women elected in Panchayats, and make them aware of their equal rights. I found it a great initiative and I think their bottom up approach will bear results.
    Chidambaram has often said that India is an ‘elephant’ and changes will come slowly but steadily. I hope technology can come to the fore in meeting these urgent needs. It is what has brought the whole world together, and it can definitely help bring our cities and villages together.
    Thank you,
    Himanshu – New York

  2. Navin says:

    Hi Shekhar,
    After reading your article I was wondering how could an ace film-maker write so knowledgably about the Indian economy. Then I remembered that you were a professional CA before you started Quasar. 🙂
    I agree with what you’ve written.
    Cheers!
    Navin

  3. Amit says:

    Its a good budget Sir. budget is not just about economics, since every other aspect; including CREATIVITY, is tied to it, so it becomes important and Politics is something that rules even economics and yes vice – versa also, but i guess in our country the balance is shifted towards the political side.
    Under the given circumstances, economical, socio-political, and global::
    THIS IS A PRETTY GOOD BUDGET, if we build upon these strategies, coming 10 years and INDIA IS THE WORLD.

  4. Rudra says:

    Indian Economy cannot completely captured by Hardward educated economist types – they always end up missing the shoot for the stick.
    Indian economy is driven by family values and savings – not unlike Japan , which witnessed the most startling phenomenon ever – the Japs were immune to interest rate cuts and still continued to save.Today they even pay to save !
    The largest component of the Indian economy is the Unorganised sector. It is a bigger employer than the biggest MNC.
    Students of Finance and economy almost alway miss the pulse of Indian economy – it is findamentally FEMININE is nature – thats what occurs to me . The cridit based, myopic , spend-thriftish , presen-oriented economic structure of the West suits their Domonating , Conquering Political intent .
    The middle class of India donot fit into any uniform statistical classification. You need a multidimentional Beyesian Classifier – the same ones we use to classify Satellite Data , to understand the rudiments of Indian Economic miracle.
    yes , it is a miracle and when you consider the Feminine Attribute to the Economy , you realise that No budget however populist will satisfy all India , and No Budget however growth oriented will never ever reach the grass roots. there is a great movement upward and with a largely closed economy , India has a long way to go.
    The Nehruvian Socialist ( closet communist ) Economic structure was libelled as ‘ Hindu Growth Rate ‘ by the same Harward types. the real face of indian economy showed in the face of Pokhran II. Close to 10 billion $ came into India Development Bonds from domestic and NRI invesments.
    I am a technology researcher and dont know about the nitty gritty of Economy terms , but my love of Mother India makes me sense where the real soul of Indian Economy is – and its definitely not capturable on Harward Drawing Boards.

  5. heather says:

    Dear Shekhar
    Your post is powerful in its understanding of the big and small pictures. Will you run for office sometime in the future?
    love, Heath

  6. Himanshu says:

    Dear Shekhar,
    I just remembered a very interesting fact. I was in Canada 2 years back on a retail banking project and we were consulting for a huge Canadian bank to build a nationwide system for loan processing. This was mainly for farmers in remote places and they would be able to apply for small loans online upto $500K, and based on the information they entered, the loan would be processed within 72 hrs, and then they can go to a local branch and get the funds. Banks in India are flushed with money these days and if broadband can penetrate a lot of villages, and if a national bank can set up such a system, it will go a long way in reducing the divide. Of course, we’ll have to put in security measures for the Indian context, but I can already see the rewards.
    Thanks,
    Himanshu – NYC

  7. Yuva says:

    every year most of us follow union budget with great aha.. but, fact remains — India is very large and unorganized. so much of these numbers doesn’t translate on ground.
    I think, overall budget was good and would have been even great if :
    * discounts for Telecom companies for move into rural/village india – so that mobile phones and boardband can be available in village. thus creative awareness.
    * more discounts for micro-finance (checks and balance to avoid any fraud)
    * rationalize tax slabs — like 0-2lakh=0%/ 2-5lakh=10%/5-15lakh=20%/20-35lakh=30%/>35lakh=50% or something that..(similar to singapore)- more income more tax. Its amazing how some many rich individuals pay so little tax. that just say, loopholes in tax system.
    * rationalize process for real estate buy/sell/pricing. almost all transaction is 40-60% is black money. and everyone knows that.

  8. mehernosh tarapore says:

    dear shekar if every indian pays taxes we do not need assistance from world bank and washington consesus programs. think about it only 4 per cent of indians pay taxes that the population of bombay bangalore and calcutta combined , think how much revenue we can get if say between 30 to 40 50 per cent pay taxes and it is spent in the right areas such as infrastructure, health education ,urban and rural development. i dont read much into the budget because both mr singh and chimbaram and aluvalia have worked for the washington consesus. any way i like your comic you created for virgin comics. mehernosh tarapore

  9. Akhilesh Shukla says:

    Hi shekhar
    I think you are rigth to the extent emphasising rural upliftment but to SOME extent only. i am afraid you too talk like any other harward guyz as mentioned above by RUDRA.
    I am not an economist but I put up some facts here confidently because I know – for my upliftment & development I need not to aquire a PhD!
    I am differing with u on your suggestion of broadband in rural area, Sir i wanna laugh on this……You think They will use broadband using kerocene oil lantern( that too rationed PDS) .
    I represent the 25% countrmen who are called BPL (below poverty line). I am from a remotest village from Hindi heartland and we are the people who drag all your socalled GDP percetiles and blah blah……
    Unless this BPL is eradicated nothing big can happen. I think these growth stories, much hyped though, are serving to a very upper strata only. i never deny that cascading effect will be there but it will be very slow and It may also make our agri based economy to manufacturing/ service oriented? Can’t we see this change – villages are getting emptied while our cities are EXPLODING – I f we dont stop this migration it will kill both-our villlages and our metros !!
    I suggest based on my own experience, we need to seriously change our focus to upliftment of our villages. Education is first priority and then penetration of technology to irrigation and very strong rural infrastructure like – canals, roads, electricity, agri based industries etc.
    Im afraid if many people are concern with the mismatch of our growth stories- over 10% industrial growth while less then two % in agriculture.!!!! These Desi Angrez, Im afraid, can’t understand the plight of our villages…..I can see evryday the devastation…I am telling you and through you all…..Our villages are detariorating day by day…..I left my village for the betterment but my village is still suffering!!!! Alas!!!! No one at Lutiyan’s seeing this…… !!!!
    I am seriously frustated to see our own farmer’s suicide. I think these policy makers are working for people sitting in south mumbai not a poor farmer dieing somewhere in remote India….
    We have best resources, best minds but poor leadership……from Nehru to Manmohan…!!! else by now we should been the main grain supplier of the world !! I’m still optimistic….!!
    Thankx for patience!!!!!
    Akhilesh

  10. shekhar says:

    Thank u Akhilesh for sharing your experience with us> I believe most of us on this blog are urban – born and brought up. Would you care to share more of your experiences being brought up in a village that you call your own ? I would be very happy to post your experiences as a guest blog – if you post is as a comment I will do so. I can understand your anger – we all feel it at variosu levels about the inequalities in our country, so please do share. Shekhar

  11. Rudra says:

    Dear Akhilesh ,
    I admire your patience in writing in detail – from your own experience. It is painful to read that the soul of India – the Indian Village is collapsing under the weight of McAulean/maxist megalomania , first hand from you.
    I am I have something in common with you Akhilesh my brother ! – the pain of the Indian condition , the loathing for the Harward economist types whi cannot even travel across to the villages anymore , and the market-economy bubble.
    I also share with you Akhilesh , the love of Mother India . She lives truly in the Indian villages – I have seen a visible deterioration of the village ecosphere first hand during the two times i have visited India in the last 8 years – in my backpacking trips across India.
    Shekhar ,
    Thank you for highlighting this. I hope we as Indians can become worshippers of Mother India with the same Passion- as in your post on Passion and Practicality and make a difference in our own ways.
    As a starter , political economists need a big kick on their backs while we re-settle our Village Economy – which wont happen unless we create conditions – spiritual , economic and material for people to want to work from their native villages.
    This is what happens when secularism and politial economy rules the body and matter of any land – even a spiritual powerhouse like India. What is body if you neglect the spirit ? To make India smile , we need the Villages of India to smile – not by market forces , but by Mother Nature and by creating local markets for local cooperatives.
    It will all start with a Passion – unbridled , unsophisticated Love for Mother India. Without that , it will just be a Bribery exercise one Voting generation at a time, while the soul of India smoulders.

  12. Akhilesh Shukla says:

    Thankx shekhar !
    for the response {so propmt !!! I thought you super humanbeings (sorry but you have to pay this small price of leg pulling being from Film stardom…) are always “late-lateef’ — just kidding !!!)
    I would love to share my experiances and would like to know the modus-operandi? How to send the write ups in guest columns?
    ……I think you know better that our villages are not meant only for sorry plights but they represent a vibrant culture, (I’d say all of us have our roots ralated there), a VERY high HQ (happiness quotient) and enduring resilience.
    Thankx again for response!
    Akhilesh

  13. Himanshu says:

    Akhilesh, thanks for your post. I must say here that all progress happens in the framework of a vision and at the beginning the ideas (like broadband) may look laughable (often impossible) but later on they become reality. There is this great quote by Albert Einstein:
    “The significant problems we face cannot be solved at the same level of thinking we were at when we created them.” This basically means that we have to think at a higher level and formulate a solution that may look laughable initially but would eventually serve the purpose. That’s how all nations have progressed and that’s how we will.
    Regards,
    Himanshu – New York

  14. shekhar says:

    akhilesh, send your post in as a comment, and I will pick it up and blog it. Look forward to it. Shekhar

  15. shekhar says:

    Rudra, u are so right. Onetime I studies Gandhiji’s ecomomics, and his insight into India was incredible. He always stated that the soul of India was in it’s villages and any economic developement had to start from the villages outwards, not with large scale monopolistic enterprises. His ideals were far more in favour of encouraging an organic economic developement. shekhar

  16. Rudra says:

    Mr.’sisname New york,
    We dont need a quote from Einstein to know what is essentially , common sense – there are far greater and infintely more volumnuous and profounder insights in the Indian Civilizational Genius and its many expressions to take a leaf out of.
    India is a million new Initiatives and a lot of good news , which however does not go well reported. McAulean Education which i guess , you are immensely proud of has alienated you from thinking in the real context of what has ever moved or what is and what will ever move the real India , my friend !
    Nations are a study in change. present day India is not just a nation-state but a part of the greater nation Bharat. It is not a country in progress but a country re-progressing. Does it make sense to you at all ??
    I am yet to see One original thought – apart from quotes from other people – from the Harward Economist types – or the JNU types…to me and to Mother India ,all those borrowed ideas are a Defeaning Silence !
    We are waiting to hear a word…

  17. Himanshu says:

    Hi Rudra,
    Thanks a lot for your post. All of my family lives in India (also, I travel so often and have been to India 14 times in the last 5 years, so I do know what’s going on) and my love for India is deeply profound. There is no need to chastise or discount somebody just because he graduated from Harvard. I am still in favor of all big initiatives to be championed by intellectuals/economists (just so long they truly care for the country) rather than some short term fix based on emotions.
    We have very good people at the top in India right now(probably the best ever) and they have to balance lots of things viz. doing the best for villages/defense/international relations/new sectors/income tax, and such decisions require a very high level of intelligence and a few miscalculations can lead the whole economy astray. We all know that India is full of good news right now – I can see it in the eyes and behavior of the Americans I talk to – India is already a superpower in their eyes. I often go to the Pierre Hotel near Central Park(one of the most prestigious in New York) and I can’t tell you how much happiness I get by seeing out tricolour flying along with the ‘Taj hotels’ flag flying over it. Once JRD started the Taj in Mumbai out of anger, and now the day has come when we can take over American 5 star hotels.
    Regards,
    Himanshu – New York

  18. vijay says:

    well, i happen to agree with your blog above and not with akhilesh. to akhilesh: Is it not true that broadband/wide and easy access to information and connectivity will actually HELP keep people in the villages? Maybe even allow them to work/have a job in the village in a distributed fashion?
    In the U.S and europe, there are any number of people who telecommute.
    But in a sense, akhilesh you are right – because -of what use is broadband and information for those who are illiterate and malnutritioned?
    I would even say that there is a natural limit to the number of people and resources a country can carry. Sanjay Gandhi had the right idea, only instead of giving ’em transistor radios, give them a laptop perhaps now!
    you cannot talk of poverty alleviation without severe population control. Why is it that in the south of india everything is normal and prosperous while in the bhaiyya heartland they are breeding away and keeping themselves firmly in poverty?

  19. Practical I says:

    Will the richest Indian billionaires channel some money out to the really poor in India (Gap between rich and poor is devastating in India). Will they be brave enough to put part of their wealth in Trusts like the top two Billionaires in the US have done.

  20. Jeryyms says:

    Nice site you have

  21. ShadowD says:

    Not bad article, but I really miss that you didn’t express your opinion, but ok you just have different approach

  22. I recently came across your post and have been reading along. I thought I would leave my first comment. I don’t know what to say except that it caught my interest and you’ve provided informative points. I will visit this blog often. Thank you.

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