This is the fourth in a series of entries Alfred Romann will post from India in the coming weeks.
A lot of people on the outside ignored it but India passed a new budget Wednesday.
The roadmap for the country’s economic growth this year puts a lot of emphasis on agriculture – which despite being very inefficient is the source of income for about two thirds of the population – and infrastructure, which is dismal. It continues a trend that started in 1991, when India decided to open its economic doors to the world. It lowered some taxes but raised them for some investors. It also does little for industry because, as Minister of Finance P. Chidambaram put it, industry is in a strong position to look after itself.
Speaking to reporters after the budget announcement, Chidambaram said the government will, one way or another, deal with inflation that is threatening to top 7% this year. It will continue the process that will eventually bring India’s market in line with other Asian economies. Above all, this is a budget aimed directly at an underprivileged rural population and an agricultural sector that needs to boost its participation in the India growth story.
The massive amount of work that goes into a national budget notwithstanding, the plan for the country’s economy in the year ahead is not particularly remarkable. It follows the work of years past to lower taxes a little, lower duties a little, increase revenues a little and try to bring a few more benefits to the rural population. It is a budget from a government that doesn’t want to take too many risks but prefers to let the economic wheels keep turning. In that sense, it seems unusually wise.
"Good economics works for everyone," Chidambaram said more than once. But "it doesn’t work for everyone at the same time."
In other words, the government believes that the fruits of India’s growth will be enjoyed by all if only there is enough time to let it do its thing.