Budget speech 2007-08: Full text

FM'S SPEECH: Chidambaram said that there were many pluses and a few minuses, both of which he dealt with in his speech candidly.

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Mr Speaker, Sir, it is my privilege to present the Budget for 2007-08.

A MID-TERM REPORT CARD ON THE ECONOMY

In November 2006, the UPA Government crossed the midpoint of its term of office. A midterm report card can now be presented. There are many pluses and a few minuses, and I shall deal with both candidly. The biggest plus is that the growth rate of GDP has improved from 7.5 per cent in 2004-05 to 9 per cent (Quick Estimate) in 2005-06 and, according to Advance Estimate, to 9.2 per cent in 2006-07. The average growth rate in the three years of the UPA Government is, therefore, 8.6 per cent. Thanks to this impressive performance, despite the poor start in 2002-03, the growth target set for the Tenth Plan of 8 per cent will be nearly achieved.

Manufacturing is the main driver of growth, and this augurs well for the future. In the three years of the UPA Government, the growth rate in manufacturing has accelerated from 8.7 per cent to 9.1 per cent and further to 11.3 per cent. The services sector continues to maintain impressive growth and has recorded, in the three years, a growth rate of 9.6 per cent, 9.8 per cent and 11.2 per cent respectively.

On the other hand, the agriculture sector has witnessed sharp ups and downs. Average growth during the Tenth Plan period is estimated at 2.3 per cent, which is below the desired level of 4 per cent a year. About 115 million families are classified as farming families. Furthermore, a country with a large population has to be nearly self-sufficient in essential food items; otherwise supply constraints could upset macro economic stability and growth prospects. Hence, agriculture must top the agenda of the policy makers and must hold the first charge on our resources. In a short while, I shall place before this House a number of proposals in this regard.

Income and Savings

To continue with the report card, per capita income in 2005-06, in real terms, increased by 7.4 per cent, and the savings rate has been estimated at 32.4 per cent and the investment rate at 33.8 per cent. Intuitively, I believe that these high rates have continued in the current year too.

The UPA Government has remained committed to economic reforms, fiscal prudence and monetary stability.

Revenues are buoyant for the third year in succession. We have garnered additional revenues and, as Honourable Members will notice presently, I have put these revenues to good use to promote inclusive growth, equity and social justice - goals that are at the core of the National Common Minimum Programme (NCMP) and close to the hearts of the UPA, its Chairperson and the Prime Minister.

Outlook on Inflation

Until February 2, 2007, bank credit, year on year, had grown by 29.6 per cent. Money supply (M3) had expanded by 21.3 per cent. Foreign exchange reserves stood at US$ 180 billion. While these are concomitant features of high growth, it cannot be denied that these monetary trends have put pressure on prices. Global commodity prices have also exerted pressure on domestic prices. At the same time, supply constraints have emerged in some essential commodities such as wheat, pulses and edible oils.

Consequently, average inflation in 2006-07 is estimated at between 5.2 and 5.4 per cent, which is higher than 4.4 per cent last year. I wish to reiterate Government's concern over inflation. Government has already taken a number of measures on the fiscal, monetary and supply sides to maintain price stability and, if required, will not hesitate to take more measures. When the UPA Government assumed office in 2004, the inflation graph was on the rise; but we succeeded in moderating inflation and we are confident that we can moderate the present inflationary trend too.

BHARAT NIRMAN AND THE FLAGSHIP PROGRAMMES

Bharat Nirman remains the cornerstone of the Government's policy. I am glad to report that in the current financial year:

• Additional irrigation potential of 2,400,000 hectares, including 900,000 hectares under AIBP, will be created;
• Drinking water has been provided to 55,512 habitations until December 2006 against a target of 73,120 habitations;
• Until December 2006, 12,198 kilometres of rural roads have been completed. The separate window under RIDF will augment funds for the programme by Rs.4,000 crore a year;
• 783,000 rural houses have been constructed up to December 2006 and 914,000 houses are under construction, and the annual target of 1,500,000 houses is likely to be exceeded;
• 19,758 villages have been covered so far under the Rajiv Gandhi Grameen Vidyutikaran Yojana;
• 15,054 villages have been provided with a telephone against the target of 20,000 villages, and the balance will be covered by the end of the year;

Honourable Members will note that Bharat Nirman continues to make impressive progress.

The eight flagship programmes of the UPA Government will continue to receive high priority. Presently, I shall refer to these programmes in some detail.