India raises defence allocation by 34 percent, leaves GDP, FDI untouched

February 16th, 2009 - 5:19 pm ICT by ANI  

New Delhi, Feb.16 (ANI): Presenting the vote-on-account for fiscal 2009-10, acting Finance Minister Pranab Mukherjee on Monday announced a hike in defence allocation, a subsidy for fertilizers and relief for small scale industry (SSI), but kept foreign direct investment (FDI) and the countrys gross domestic product (GDP) intact.
Placing emphasis on the impact of the 26/11 attacks on Mumbai that claimed 179 lives and maimed over 300 others, Mukherjee proposed a 34 percent hike on defence allocation to Rs.114700 crore.
Mukherjee described the attacks on Mumbai as a threshold being crossed in affecting the nation’’s security environment to justify the defence allocation increase, and added that it would include over Rs.54, 800 crore for capital expenditure. He also promised to meet any additional requirement to ensure the security of the nation.
Turning to subsidies, he said that the outgoing UPA Government is proposing a provision of Rs.95, 000 crore for items like food, fertilizers and petroleum. He also said that the negative impact on exports due to the global meltdown would be softened through the extension of the interest subsidy of two per cent on pre-shipment and post shipment credit for employment-oriented sectors like textiles, handloom, handicrafts, carpets, leather, gem and jewellery and marine products.
As far as small and medium scale enterprises were concerned, he said that the present government is ready to hand out an additional financial outgo of Rs.500 crore.
Admitting that the global meltdown could have been far worse than what it was in the current fiscal, Mukherjee said India was able to ensure a healthy 7.1 per cent GDP growth rate, making it the second fastest growing economy in the world.
Announcing that the vote-on-account 2009-10 would have a total expenditure of Rs.953231 crore, of which Rs.285149 crore would be planned expenditure and Rs.668082 crore would be non-planned expenditure, Mukherjee said that the gross budgetry support for planned expenditure was 17.16 percent higher than what prevailed in the budget for 2008-09.
Expressing his happiness over the governments ability to attract private investment to infrastructure-related sectors like telecommunications, power generation, airports, ports, road and railways, Mukherjee announced a new initiative to provide re-financing to banks for long-term credit. He said that India Infrastructure Finance Company Limited (IIFCL) would give sixty per cent of refinance of commercial bank loans for public-private partnership projects in critical sectors.
He also referred to a slew of measures taken by the Reserve Bank of India (RBI) to ease the liquidity crunch and said that the reduced a cash reserve ratio (CRR) and the statutory liquidity ratio (SLR) would facilitate flow of funds.
The announcement of extending export credit for labour intensive projects was another significant move of the vote-on-account.
Saying that extraordinary economic circumstances merit extraordinary measures, Mukherjee said that except for a small negative list, Foreign Direct Investment (FDI) was allowed mostly on the automatic route. This helped the nation get a record FDI of thirty two billion dollars in the current fiscal.
In spite of the global meltdown, he said India received over twenty three billion dollars in FDI during the period April-November 2008, a growth of 45 percent over the same period in 2008-09.
The acting Finance Minister also listed the good performance of the economy in the current financial crisis and said that the tax to GDP ratio increased from 9.2 per cent in 2003-04 to 12.5 per cent in the current fiscal bringing the nation within the striking distance of the target for fiscal correction.
This, he said, had enhanced the capability of the country to raise resources internally to finance growth at the rate of nine per cent per annum during the 11th Five-Year-Plan.
Investment and savings also showed significant improvement with domestic investment rate going up from 27.6 per cent of GDP to 39 per cent during the same period, Mukherjee said, adding that the Gross Domestic Saving rate had shot up from 29.8 per cent to 37.7 per cent.
Lauding the contribution of farmers, Mukherjee said the government would continue to provide cheaper loans to farmers in the coming financial year.
He said interest subvention will continue to help farmers get short-term crop loans of up to three lakh rupees at seven percent per annum.
He said that it was a matter of pride that over 3.6 crore farmers have been given debt relief amounting to 65 thousand three hundred crore rupees since the scheme came into operation from June last year.
The government also ensured remunerative prices for their crops . The minimum support price for the common variety of paddy increased to 900 rupees per quintal from 550 and the minimum support price for wheat went up to 1,080 rupees per quintal from 630 rupees in 2003-04. Terming them as real heroes of India’’s success story, he said they ensured food security for the country with a record out put.
He announced that the country’’s granaries are full with a record procurement of 22.7 million tons of wheat and 28.5 million tons of rice for public distribution system in 2008.
The production of food grains crossed an all-time high over 230 million tons in 2007-08 a hike of ten million tons each year. He said output for the current fiscal is also encouraging with the country receiving normal rainfall. (ANI)

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