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.