July 1996 Budget

5. On the last occasion, I had made over forty specific promises on policies and programmes. I have carefully taken stock of the situation, and Hon'ble members will be pleased to know that I have fulfilled all these promises, save one, to which I shall refer presently. To recall the more important ones, I am happy to state that we have
   • Provided an additional sum of Rs.2466 crore to the States for seven Basic Minimum Services;
   • Funded the Rural Infrastructure Development Fund (RIDF)-II with Rs.2500 crore;
   • Expanded the list of industries eligible for automatic approval for foreign equity investment;
   • Set up the Disinvestment Commission and the Tariff Commission;
   • Introduced the Jeevan Suraksha and the Jan Arogya insurance schemes; and
   • Launched the Accelerated Irrigation Benefit Programme.
     
     
6. The one commitment that I have been unable to keep is to set up an Expenditure Management and Reforms Commission. I failed because I wanted an A team and I was not content with a B team. Key members of the A team are in this House and in the Rajya Sabha, and they still elude me. I shall keep trying. Meanwhile, I have not let up on my resolve to keep expenditure within the Budget, and I have achieved a fair measure of success.
   
   
   
   Current Economic Situation
   
   
7. The Economic Survey 1996-97 was laid in Parliament a few days ago. It provides a detailed and balanced account of the state of the economy. There is indeed much to be done, but there is also much to be proud of. The outstanding feature of the economy is that the GDP has been growing during the last three years at an average rate of 7%. I salute the farmers, the workers, the entrepreneurs and the service providers who have made this possible.
   
   
8. The positive features of our economic performance in 1996-97 include:
   • Continued high economic growth at 6.8%;
   • A strong recovery of growth in agriculture and allied sectors to 3.7%, after a disappointing minus 0.1% in 1995-96;
   • Rebound in foodgrains production to 191 million tonnes;
   • Manufacturing sector growth at 10.6%; and
   • A sizable build up in our foreign currency reserves from US$ 17.0 billion to US$ 19.5 billion as on February 27, 1997.
     
     
9. I shall not be true to myself or to the country if I did not highlight the areas of weakness. Two areas of great concern are the sharp drop in domestic crude oil production and the sluggish performance of the power sector. Other matters of concern include a deceleration in the growth of exports, a rise in the rate of inflation and a volatile capital market. Government has addressed these concerns through some far-reaching initiatives in the last three months. I have also fresh proposals in this Budget.
   
   
10. Macroeconomic management involves, inevitably, striking a balance between various objectives and considerations. As Hon'ble Members are aware, in 1995-96, the growth in money supply was reduced sharply to 13.2%. Although this helped to contain inflation, it also led to high real interest rates, a widespread perception of a liquidity crunch and a slackening of investment proposals. Since June 1996, corrective action has been taken which has eased the availability of money and brought down the interest rates. The long-delayed increase in the prices of petroleum products and supply-side problems, arising mainly out of lower production and lower procurement of wheat in the last season, exerted pressure on the price level. Government has taken a number of steps to maintain price stability. Paddy production and procurement in the Kharif season have been satisfactory and we have adequate stocks of rice. The Rabi wheat crop is also very promising and steps will be taken to maximise procurement. At the same time, I would like to make it clear that, if necessary, government will not hesitate to import wheat and other essential articles to counter the pressure on prices. Maintaining price stability is high on the agenda of this government.
    
    
11. Apart from supply side management, we have to adopt prudent fiscal and monetary policies that will stabilise prices. For the year 1997-98, government and the RBI will act in concert towards a further reduction in the fiscal deficit, containment of the growth of money supply within 16% and adoption of a liberal import policy for essential commodities. Our goal is to break inflationary expectations and reduce the rate of inflation from the present level.