NEW DELHI, FEB 29, Reuter: India announced a populist budget on Monday aimed at helping farmers overcome a crippling drought and trying to ensure that the ruling congress (I) party wins next year’s general elections. Finance Minister Narayan Dutt Tiwari said in Parliament amidst congress party cheers that the budget would reduce interest rates on agricultural credit, cut fertilizer prices and abolish excise duties on pesticides and modern farm machinery.

For middle classes, there was no appreciable increase in taxes except for a year’s extension of a five percent surcharge on income tax announced last September to finance relief measures for the farmers.

One million lower paid wage earners benefited by a rise in the standard deduction they can claim from income tax.

For industry, Prime Minister Rajiv Gandhi’s government gave more concessions to importers of electronic and textile goods to stimulate growth among domestic manufacturers.

But the main beneficiaries were India’s rural population 70% of the country’s 800 million people who were badly hit by last year’s drought, their plight have led in recent weeks to widespread protest and demands for relief by militant peasants in the electorally crucial North.

Monday’s budget placated the peasant militants by increasing expenditure on agriculture and water resources by 40.7% to 9.02 billion rupees (694 million dollars) in fiscal year 1988/89 ending March.

It is populist budget inasmuch as it has helped farmers, we welcome it, said opposition Telegu Desam leader P.Upendra.

But Upendra criticized the budget for not redressing a major grievance of the tens of thousands of farmers who protested in North India earlier this month their demand for higher government controlled crop prices.

The budget, however, provided finance of 22 billion rupees (1.7 billion dollars) for rural development programs including drinking water, irrigation and housing.

To keep down government spending despite the concessions to farmers, the budget held defense expenditure to 130 billion rupees (10 billion dollars) a rise of 8.3 per cent.

Defense expenditure boosted by large arms purchases and large scale military maneuvers near the Pakistan and Chinese border, rose last year by an unprecedented 43 per cent over 1986/87.

But the lowering of the rate of growth of defense spending failed to help Gandhi keep a pledge he made last year to hold the budgetary deficit at last year’s figure of 60.8 billion rupees (4.68 billion dollars).

The 1988/89 budgetary deficit rosé to 74.84 billion rupees (5.76 billion dollars). But it will still fall short of India’s highest ever — 82.61 million rupees (6.35 billion dollars) in fiscal 1986/87.

The budget forecast total expenditure rising to 735.6 billion rupees (56.58 billion dollars) from the revised estimates of 661.61 billion rupees (50.89 billion dollars) this year.

It was harsher on consumer products, raising duties on cars above 1,000cc raised from 25 to. 30 percent and the cost of color television sets by 250 rupees (19 dollars) to 2,000 rupees (154 dollars),

The budget, however, softened its impact by exempting toys, dolls, musical instruments and even pencil sharpeners from duty in one of the lighter moments of its presentation Parliament.

Article extracted from this publication >> March 4, 1988