(i) maintaining a growth rate of 7-8 per cent per year for a sustained period;

(ii) providing universal access to quality basic education and health;

(iii) generating gainful employment and promoting investment;

(iv) assuring hundred days of employment to the breadwinner in each family at the minimum wage;

(v) focusing on agriculture, rural development and infrastructure;

(vi) accelerating fiscal consolidation and reform; and

(vii) ensuring higher and more efficient fiscal devolution.

The sixth budget of the Government of the United Progressive Alliance is an Interim Budget covering the last few months of this governmental term, until 22 May 2009. It would not normally be seen to carry much significance, as its job is simply to complete the policies of the preceeding five years.

However this Interim Indian Budget has been given a special significance thanks to the global financial and economic crisis, and expectations of more stimulus measures and budget 'goodies'.

During the first four years of the UPA government, Indian Gross Domestic Product (GDP) recording increase of 7.5 per cent, 9.5 per cent, 9.7 per cent and 9 per cent from fiscal year 2004-05 to 2007-08. This was the first time that the Indian economy showed sustained growth of over 9 per cent for three consecutive years.

Per capita income grew but at a slower rate of 7.4 per cent per annum. This was slower than many economists hoped, and did not always reach the countryside and urban poor, but it still represented the fastest ever improvement in Indian living standards.

During this period, the fiscal deficit came down from 4.5 per cent in 2003-04 to 2.7 per cent in 2007-08 and the revenue deficit declined from 3.6 per cent to 1.1 per cent.

The domestic investment rate as a proportion of GDP increased from 27.6 per cent in 2003-04 to over 39 per cent in 2007-08. The gross domestic savings rate shot up from 29.8 per cent to 37.7 per cent during this period. The gross capital formation in agriculture as a proportion of agriculture GDP improved from 11.1 per cent in 2003-04 to 14.2 per cent in 2007-08.

The growth of Government revenues facilitated fiscal consolidation as mandated in the FRBM Act. The tax to GDP ratio increased from 9.2 per cent in 2003-04 to 12.5 per cent in 2007-08 bringing us within striking distance of the target for fiscal correction. This enhanced capacity to raise resources internally to finance GDP growth.

The growth drivers for this period were agriculture, services, manufacturing along with trade and construction. With record procurement of 22.7 million tonnes of wheat and 28.5 million tonnes of rice for the Indian Public Distribution System in 2008, granaries are full.

During this four year period, the annual growth rate of agriculture rose to 3.7 per cent. The production of foodgrains increased by about 10 million tonnes each year to reach an all time high of over 230 million tonnes in 2007-08. Despite a high base, the outlook for 2008-09 is encouraging with the country receiving normal rainfall during the agricultural season. Manufacturing, registered as well as unregistered, recorded a growth of 9.5 per cent per annum in the period 2004-05 to 2007-08. Similarly, communication and construction sectors grew at the rate of 26 per cent and 13.5 per cent per annum, respectively.

Indian economic growth is based largely on domestic consumption, but foreign trade and foreign direct investment & capital inflows play a catalytic role. India’s exports grew at an annual average growth rate of 26.4 per cent in US dollar terms during this period. Foreign trade increased from 23.7 per cent of GDP in 2003-04 to 35.5 per cent in 2007-08. Policie to integrate the Indian economy with the world and open up to globalization created new opportunities for Indian corporates to build world scale plants and aim at global competitiveness.

In order to maintain a high GDP growth rate on a sustained basis with price stability, the Indian economy has to face two inter-related macro-economic challenges. These relate to capital inflows and global inflation. Profitable investment opportunities generated by high GDP growth attract foreign capital. In 2007-08, capital inflows grw to a record 9 per cent of GDP, far in excess of current account financing requirements leading to large accumulation of reserves and build up of pressure on prices.

During 2008-09, international prices of many essential commodities particularly fuel oils, food and edible oils and metals rose to alarming levels. To cite just one example, the price of crude oil which was US $ 28 per barrel in 2003-04 shot up to US $ 147 per barrel in 2008. The sharp rise in global inflation, even with a moderated pass-through, put pressure on domestic prices. The WPI headline inflation shot up to nearly 13 per cent in the first week of August 2008. To ease supply side constraints, Government took a series of fiscal and administrative measures, in concert with monetary policy measures by the Reserve Bank of India. RBI raised the interest rates to mop up excess liquidity. This, in turn, had implications for the growth rate from the demand as well as supply side. These, along with easing of global price pressures, led to a decline in domestic prices with inflation rate falling to 4.4 per cent on January 31, 2009. We have weathered the crisis, but there is no room for complacency.

In 2008, the global financial crisis has affected India, despite resilience in consumer spending. To counter the negative fallout of the global slowdown the Indian Government created two fiscal stimulus packages, announced on December 7, 2008 and January 2, 2009. They provided tax relief to boost demand. They also increased expenditure on public projects to build vital infranstructure and create employment.

To help firms facing financing difficulties arising from the current downturn, the government provided refinance to the banks for long term credit extended to these projects

For this purpose, IIFCL has been authorized to raise Rs.10 thousand crore in the market by the end of March 2009. An additional Rs.30 thousand crore can be raised if required. With this, IIFCL and banks will be able to support projects involving a total investment of Rs.100 thousand crore in infrastructure.

The Reserve Bank of India has also taken a number of monetary easing and liquidity enhancing measures including reductions in its cash reserve ratio, statutory liquidity ratio and key policy rates.

The objectives of the Interim Budget are as follows:

(a) To continue to pursue macro economic policies to sustain a growth rate of at least 9 per cent per annum over an extended period of time;

(b) To strengthen the mechanisms for inclusive growth for creating about 12 million new work opportunities per annum;

(c) To reduce the proportion of people living below poverty line to less than half from current levels by 2014;

(d) To ensure that Indian agriculture continues to grow at annual rate of at least 4 per cent;

(e) To bridge the infrastructure gap by increasing the investment in infrastructure to more than 9 per cent of GDP by 2014;

(f) To support Indian industry to meet the challenge of global competition and sustain the growth momentum in exports;

(g) To strengthen and improve the economic regulatory framework in the country;

(h) To expand the range and reach of social safety nets by providing direct assistance to vulnerable sections and insulate them from dislocative effects of slowdown in economy;

(i) To strengthen the delivery mechanism for primary health care facilities with a view to improve qualitatively the preventive and curative health care in the country;

(j) To create a competitive, progressive and well regulated education system of global standards that meets the aspiration of all segments of the society; and

(k) To move towards providing energy security to all by pursuing an Integrated Energy Policy.

The Interim Budget - India Interim Budget 2009

Indian Interim Budget 2009 - Background, Overview, Objectives And The Eleventh Five Year Plan

Revised Estimates, Indian Revised Budget Estimates 2008-2009, RE 2008-09

Indian Budget Estimates 2009-2010, BE 2009-2010, Indian Interim Budget

Tax Budget - Tax and Taxes, Indian Interim Budget 2009

Agriculture Budget - Indian Interim Budget 2009, Agricultural Sector, Rural Development Budget

Education Budget - Indian Interim Budget 2009, Education Sector

Social Sector Budget - Indian Interim Budget 2009, Social Sector

Financial Sector Budget - Financial Sector Reforms, Indian Interim Budget 2009

India Budget 2008

Budget Expectations 2008

India Railway Budget 2008