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Summary of Sinha's speech

Following is the summary of the finance minister's speech in the Parliament.

Agricutlure and Rural development

The government has already announced the first ever national policy on Agriculture. The provision of adequate credit flow is critical for agricultural production. Total credit flow to agriculture through institutional channels of commercial banks, cooperative banks and regional rural banks is estimated to have reached a level of Rs 515 billion this year, an increase of about 15 per cent over last year.

It is expected to increase to Rs 640 billion in 2001-02 representing an increase of 24 per cent. In order to ensure continued healthy growth of the agricultural sector, the finance minister proposed a number of steps:

To help the states, the interest rate charged by NABARD will be reduced from 11.5 per cent to 10.5 per cent. The corpus of Rural Infrastructure Development Fund (RIDF) VII will be increased from Rs 45 billion to Rs 50 billion next year.

The banks will be asked to accelerate Kisan Credit Cards to cover all eligible agricultural farmers within the next three years. The premium burden on this account will be shared by the card issuing institutions.

NABARD and SIDBI were asked to link one lakh Self-Help Groups during the current year. A micro finance development fund has also been set up in NABARD with contribution of Rs 400 million each by NABARD and RBI.

NABARD was permitted to issue capital gains tax exemption bonds last year. This has helped NABARD to mobilise more than Rs 10 billion at lower than normal interest rates thereby reducing its cost of funds. This tax exemption would continue.

The resources from the Watershed Development Fund set up in NABARD would be used to promote people's participation and also enable water users' associations to implement, operate and maintain irrigation schemes.

In 1999, a credit linked subsidy scheme for construction of cold storages for perishable commodities was announced. The finance minister has announced the extension of this scheme to cover rural godowns also. The loans would carry an adequate long-term repayment period and would enable individuals, cooperative societies and others to build godowns.

This scheme will enable small farmers to enhance their holding capacity in order to sell their produce at remunerate prices. NABARD will reduce its rate of interest from 10 per cent to 8.5 per cent. Small farmers will particularly benefit from this scheme by avoiding distress sales.

A sum of Rs 610 million has been provided for the Centrally Sponsored Scheme on ''On-Farm Water Management for increasing Crop Production in Eastern India''.

Rural Roads

A new scheme, the Pradhan Mantri Gramodaya Yojana (PMGY) was launched with the objective of undertaking time bound programmes to fulfil the critical needs of the rural people. A central allocation of Rs 25 billion was provided for 2000-01.

50 per cent of the diesel cess is earmarked for development of rural roads.

Rural Electrification

A package of initiatives have been announced to improve power distribution in rural areas. The initiatives include extension of assistance to the states for village electrification works under the PMGY, stepping up credit support from Rural Electrification Corporation to SEBs for speedy electrification of dalit bastis, households of scheduled tribes and other weaker sections of society, improving the quality of power supply in villages and augmentation of distribution networks in rural areas and earmarking a sum of at least Rs 7.50 billion for rural electrification works.

Management of Food Economy

To give an enlarged role to State governments in both procurement and distribution of foodgrains for PDS in their respective states. Instead of providing subsidised foodgrains, financial assistance would be provided to the state governments to enable them to procure and distribute foodgrains to BPL families at subsidised rates. Details for operationalising these arrangements will be worked out in consultation with the state governments at the earliest.

The government proposes to review the operation of the Essential Commodities Act 1955 and remove many of the restrictions imposed on the free inter-state movement of foodgrains and agricultural produce and also on the storage and stocking of such commodities.

Infrastructure

Power

The importance of power in fuelling economic growth cannot be over emphasised. The total cost to the state electricity boards of implicit subsidies amounts to about Rs 360 billion this year. After accounting for cross subsidy and state subventions, actual commercial losses of all SEBs combined are estimated to be about Rs 240 billion.

The total dues owed to Central Government utilities by SEBs and others now amount to over Rs 250 billion. In order to help accelerate the reform process in the power sector and to unify all existing central legislations in the sector, the plan outlay for central sector power utilities is being raised from Rs 91.94 billion this year to Rs 100.30 billion for 2001-02.

The National Highway Development Programme (NHDP) represents a new road vision for this country. The key to government's success in accelerating the road development programme lies in its bold policy of levying a cess on petrol and diesel as a user charge for road usage. The cess has paved the way for integrated road development in the country, including village roads, district roads, state roads and national highways.

Rs 9.62 billion from the cess fund is being made available to states for state roads. The total plan outlay for this sector is being enhanced by 93 per cent to Rs 87.27 billion in 2001-02.

Looking ahead, having recognised the imperatives of technological change in this area, the government proposes to introduce the Convergence Bill to cover telecommunications, information technology and information and broadcasting sectors in an integrated manner.

Successful investment is being enabled by the setting up of economic tariff levels. The infrastructure sector will be enabled to raise long term funds, particularly with the opening of the insurance sector.

Textiles

The finance minister has announced a textile package. At least 50,000 new shuttleless looms and the modernisation of 250,000 plain looms to automatic looms is expected to take place by 2004 through funding from the Technology Upgradation Fund Scheme (TUFS). The budget provision under TUFS is being raised from Rs 500 million this year to Rs 2 billion in the next year. The budget allocation for Ministry of Textiles is being enhanced substantially from Rs 4.57 billion in 2000-01 to Rs 6.50 billion in 2001-02.

Human Development

Recognising the need for increasing investments in social sectors, the Plan allocation for the Ministry of Health and Family Welfare has been stepped up from Rs 49.20 billion to Rs 57.80 billion. This includes an allocation of Rs1.80 billion for HIV/Aids Control Programme.

A new scheme for strengthening the State Drug Testing Laboratories and pharmacies has been announced to provide Indian Systems of Medicine and Homeopathy benefits similar to the pharmaceutical industry.

An integrated National Education Programme - the Sarva Siksha Abhiyan - has been launched for universalising elementary education and a National Mission constituted with the prime minister as chairman. All existing schemes on elementary education will converge with this scheme after the Ninth Plan and it will cover all districts in the country by March next year.

The finance minister also announced the proposal to launch an integrated scheme for women's empowerment in 650 blocks through women's self help groups and start a new scheme for women in difficult circumstances like widows of Vrindavan, Kashi and other places, destitute women and other disadvantaged women groups.

In keeping with the government's commitment to improve the welfare of the scheduled tribes, a separate National Scheduled Tribes Finance and Development Corporation with an authorised share capital of Rs 5 billion was set up. The allocation for the schemes for welfare of scheduled tribes in the Ministry of Tribal Affairs has been enhanced from Rs7.86 billion this year to Rs 9.86 billion in the coming year.

Similarly, the allocation for the schemes for welfare and upliftment of scheduled castes in the Ministry of Social Justice and Empowerment has been enhanced from Rs 7.09 billion this year to Rs 7.90 billion in the coming year.

Social Security

A new Group Insurance Scheme, the Janashree Bima Yojana to extend social security cover to the poorest section of society was launched by the prime minister on August 10, 2000. A special scheme for landless agricultural labourers, the Khetihar Mazdoor Bima Yojana which will provide benefits of insurance cover as available under Janashreee Bima Yojana and a pension of Rs100 per month to the beneficiary on attaining the age of 60 years.

Journalist Welfare Fund

Journalists have to increasingly take greater risks in covering terrorist and other violence prone incidents. As an acknowledgement of their services and sacrifices, the finance minister has proposed to set up a Journalist Welfare Fund with a contribution of Rs 10 million under the grants of the Ministry of Information and Broadcasting.

Fiscal Consolidation

The finance minister said the most serious problem confronting the economy is the poor state of the fiscal health of both the central and state governments. The total receipts of the central government in the current year according to Budget Estimates are about Rs 2810 billion. Of this amount, Rs 720 billion is states' share of the central taxes and grants.

The central government is therefore, left with Rs2090 billion. On the expenditure side, about Rs 1010 billion was to be spent on interest, Rs 590 billion on defence, Rs 230 billion on major subsidies and Rs 160 billion on pensions.

The net amount left for meeting all other government expenditure totalling Rs 1230 billion was therefore only Rs120 billion. The most worrisome aspect is that over 70 per cent of the borrowing i.e. Rs 770 billion was for financing unproductive revenue expenditure. An Expenditure Reforms Commission was set up last year and the Fiscal Responsibility Bill was introduced. The bill seeks to reduce the fiscal deficit to two per cent and completely eliminate the revenue deficit over the next five years.

Consequently, for the first time in many years, the fiscal deficit target fixed in the budget has indeed been achieved and remains at 5.1 per cent in the Revised Estimate of the current year. The target of 3.6 per cent revenue deficit has also been achieved.

Expenditure Management

The process of bringing about structural changes in the composition of central government expenditure would be continued to effect economy in non-plan revenue expenditure with greater vigour while improving the quality of plan expenditure, the finance minister said.

User charges for services provided by government and its agencies will be revised keeping in view the increased cost of these services. As about three per cent of staff retire every year, this will reduce the manpower by two per cent per annum, achieving a reduction of ten per cent in five years as announced by the prime minister.

Standard Licence Fee (rent) on government accommodation will be enhanced by 50 per cent for Group A, 25 per cent for Group B and 15 per cent for other categories of staff with effect from April 1, 2001.

Budget 2001
Money

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