"I rise to reply to the debate on the Union Budget 2009-10, which I presented on 6^th July 2009.  I am grateful to the Hon. Members for taking active part in the debate and making valuable contribution. Especially so, when the first-timers and young Members in their maiden speeches have raised pertinent issues that are of common concern to all of us. 

2. The performance of UPA in the last five years has raised the expectations of our people - the farmers, the small business, our entrepreneurs, the youth and the vulnerable segments of our population, and even that of our global collaborators and the foreign investors. In the best of times these expectations could rests heavily on the shoulders of the Government. And these are not the best of times. However, just as we have not been found wanting in the past, we shall respond to the challenges and create opportunities to meet the aspirations of our people.

3. As I mentioned in my budget speech, there are some early indications of recovery in the global economy and the Indian economy is also showing signs of pick-up, though uncertainties remain on several fronts. 

4. Some positive signs  in the Indian economy are:

On Agriculture

Apprehensions are being expressed on the gross neglect of Agriculture. I would like to remind my friends that it was during the regime of the UPA Government that Agriculture grew at a rate of about 4% per annum with substantial increase in the plan allocation and capital formation in the sector.

The steps taken to boost the Agriculture sector are:

i) Target of Agricultural credit for the year 2009-10 is being raised to Rs.3,25,000 cr. as against Rs.2,87,000 cr. in 2008-09.

ii) Short term crop loans of upto Rs.3 lakh per farmer are being given at a concessional rate of 7%. This is being lowered to 6% for those farmers, who repay their loans on schedule.

iii) Under the Agricultural Debt Waiver and Debt Relief Scheme 2008, the farmers having more than 2 hectares of land were given time upto 30^th June, 2009 to pay 75% of their overdues. Due to the late arrival of the monsoon, this period has been extended by six months upto 31^st December, 2009.

iv) It is proposed to extend investment linked tax incentives to the business of setting up and operating 'Cold Chain' warehousing facilities for storing agricultural produce. Under this method, all capital expenditure other than expenditure on land, goodwill and financial instruments will be fully allowable as deductions.

v) Some doubts have been raised about the inadequacy of the financial provision for the agriculture sector and farmers in Budget 2009-10. It was mentioned by an Hon. Member that only 1% of total expenditure of Rs.10,20,838 cr. has been earmarked for agricultural sector. If we go into the details of various expenditure provisions, Hon. Members will notice that more than 24% of the total expenditure after excluding interest payments, defence expenditure, and salary and pension related expenditure is directly or indirectly going to the agriculture sector of the economy.

In recent weeks, there have been some concerns on the progress of monsoon. The Government is monitoring the situation on a daily basis and is ready to implement its contingency plan, if required.

On Infrastructure

1.  Infrastructure is high priority area. Investment in infrastructure will raise the capacity for rapid growth and employment generation. Rural infrastructure is of special importance, as it will disperse incomes and bring prosperity n the rural areas. Through the four fiscal packages announced so far (including the 6^th July Budget Speech package), the Central Government has given an overall stimulus of nearly Rs.2,18,000 crore to the economy. Bulk of this is being directed towards investment in infrastructure, both urban and rural, as well as 'Aam Admi' centric programmes, like NREGA, Pradhan Mantri Adarsh Gram Yojana, Bharat Nirman, etc.

2. To give an example, the plan outlays for rural and urban infrastructure have increased from Rs.62,647 crore in BE 2008-09 to Rs.1,24,038 crore in BE 2009-10 marking an increase of 98%.

3. The outlays for women centric programmes across sectors have increased from Rs.27,662 crore in 2008-09 to Rs.56,858 crore in 2009-10, an increase of 105%.

4. The outlays for minorities have increased from Rs.1000 crore in 2008-09 to Rs.1740 crore in 2009-10, an increase of 74%.

On Fiscal Prudence

1.  In respect of the macroeconomic policy, it is essential that we come back to the path of fiscal prudence without compromising our growth momentum as soon as the current economic circumstances permit us to do so. We cannot lose sight of the fact that much of our recent success in raising our growth trajectory has come about due to adherence to FRBM targets, both at the Central and State levels. Fiscal prudence is critical for maintaining a stable balance of payments, moderate interest rates and steady flow of external capital for corporate investment.

2. As I had indicated in the medium term fiscal policy statement, required under the FRBMA and placed as a part of the budget documents, the fiscal deficit is expected to come down from 6.8 per cent of GDP in 2009-10 (BE) to 5.5 per cent in 2010-11 and further to 4.0 in 2011-12. Correspondingly, the revenue deficit is expected to decline from 4.8 per cent of GDP in 2009-10 to 1.5 per cent in 2011-12.

3.  There are a number of factors that will make this possible:

(a)  the Sixth Pay Commission arrears would have been paid out in 2009-10 with no further liability on this account in 2010-11;

(b) the increase in plan spending as a part of the implementation of the fiscal stimulus has been in the nature of front loading of the plan expenditure approved for the Eleventh Five Year Plan. With some effort we should be able to align it with our future requirements;

(c) much of the decline in business and corporate tax collections is cyclical and will tend to be reversed with growth expected to pick-up from the second half of the current year; and

(d) the introduction of GST in 2010-11 is expected to bring a sustained rise in tax revenues.

On Government's Borrowing Programme

1. Serious concerns have been voiced on the implications of the Government's borrowing programme undermining the cost and the availability of funds for the recovery in growth of private investment. The net market borrowing requirement for 2009-10 through GoI dated securities works out to Rs. 3,97,957 crore. The actual net borrowing through Government securities in 2008-09 was Rs. 2,21,472 crore. Notwithstanding the increased borrowings in the current year, the cost of borrowing has been significantly lower so far.

2.  During the first half of 2009-10, the Government market borrowing of Rs.2,41,000 crore of dated securities is being supported by RBI through its Open Market Operations(OMO). It has to be understood that OMO of RBI should not be confused with monetisation of government borrowings and that the Government has no intentions of monetising its debt.

On People's Participation in Public Sector Units

Madam Speaker,

1. After I presented the Budget on 6^th July 2009 a number of news items have appeared in the media commenting on my so called silence on disinvestment in Central Public Sector Undertakings.

2.  I would like to mention that the President's Address to the Joint Session of both the Houses of Parliament on 4^th June 2009 had clearly spelt out the policy of the Government on disinvestment, i.e, Government would develop people-ownership of public undertakings while ensuring that Government equity does not fall below 51 per cent and the Government retains the management control of the company. I reiterated this in my Budget speech. It is our intention to enable the PSUs to benefit from techno-managerial efficiencies and become more competitive in the market. My Ministry has initiated discussion with other Ministries and Departments for identifying the public sector undertakings where a portion of Government shareholding can be sold and for issue of fresh equity by the public sector undertakings to meet their fund requirements. The details are being worked out and would be announced in due course.

On Financial Sector

1.  We all know that the global financial crisis did not affect Indian banks or financial market directly, but it did expose a number of weaknesses in our financial system. The events over the last two years and the outflows and inflows of FII equity more recently, has brought home with renewed force the volatile nature of certain private capital flows. Though such flows provide critical risk capital with long-term benefits to the economy, the volatile nature of these flows has a negative impact on investments decisions. We have to create the necessary policy environment that helps in addressing such concerns.

2. There are other issues in financial sector, such as those related to the development of long-term debt markets and deepening of corporate debt markets for improving resource flows to infrastructure investments; improving future markets for better price discovery and regulation; and overcoming institutional hurdles to better intermediation. These will have to be addressed in order to make the sector more competitive with an efficient regulatory and oversight system, which is responsive to the needs of high growth economy.

On Investment Environment

The reforms of the 1990s by liberalizing investments across sectors created a competitive environment in which Indian entrepreneurship could flourish. The fruits of these reforms emerged gradually in the form of rising output and employment and a significantly higher growth from 2003-04 onwards. There is sometimes a perception among financial and other investors that in the recent past, Government has been slow on policy reforms. I intend to look into all issues, legislative or otherwise necessary to carry forward the reforms to their logical end.

Conclusion

i)  The focus of our policies is Aam Admi. But we are equally aware of the fact that wealth has to be created before it can be distributed. 

ii) I have faith in the determination of the people of this country and the resilience of the Indian economy which has proved wrong the Cassandras of doom earlier and will do so again.

iii) Let me conclude by quoting Smt. Sonia Gandhi, UPA's Chairperson and Congress President, "Let us surprise Professor Amartya Sen by giving up our favourite trait of being 'unendingly argumentative' and for a change let us be 'effectively collaborative'."

BSC/BY/GN-253/09