Chidambaram's Budget 2008

India spends more on poor in budget 2008-09

* $15.05bn debt relief for farmers, economic growth slows, cuts excise duty on autos, inflation at 4.89 percent

NEW DELHI: India’s Congress-led government announced Friday huge debt relief for farmers as it reached out to its traditional rural support base in possibly its last budget before the next polls.

Finance Minister Palaniappan Chidambaram offered a debt relief package for farmers of 600 billion rupees ($15.05 billion) in the budget for the year starting April 1, even as India’s economic growth began to slow.

He told parliament 30 million indebted farmers would have their loans fully waived by the end of June and another 10 million would receive aid.

Through the loan waiver scheme, “the country is discharging a deep debt and sense of gratitude to farmers,” he said.

The government intends “to make growth more inclusive”, the minister said. “We are raising our sights and doing more.”

The farm sector is crucial as it provides a living for two-thirds of India’s 1.1 billion populations. T.N. Ninan, publisher of leading financial daily Business Standard told India’s NDTV news that the debt relief programme was “the single biggest giveaway in India’s fiscal and banking history.”

But he questioned how it would be applied, noting many farmers’ debts were to moneylenders. Farm growth is forecast to slow to 2.6 percent this fiscal year from 3.8 percent the previous year.

Analysts attributed the market’s unhappiness to a knee-jerk investor response to an increase in the short-term capital gains tax to 15 percent from 10 percent. Chidambaram said he was confident the economy would grow nearly nine percent in the current fiscal year to March 2008, down from 9.6 percent the previous year due to aggressive monetary tightening to curb inflation. But the Indian economy would still be the second fastest-growing in the world after China’s.

Data released Friday showed economic growth slowed to 8.4 percent for the third quarter ended December 31, 2007, compared with 9.1 percent in the same period the previous year as a slew of interest rates hikes hit consumer and infrastructure spending and industrial production.

India’s economy under the communist-backed United Progressive Alliance coalition government, which took office in 2004, had grown by over eight percent during 12 successive quarters since 2005.

“We need an ambitious scheme... to revive agriculture,” he said.

Economic growth slows to 8.4 percent in Q3: India’s economy grew by 8.4 percent in the third quarter, its slowest pace in two years, on lower farm and industrial output from the same period a year ago. The data showed that the economy expanded almost in line with a forecast of 8.7 percent for the year ending March. But the pace is well off the 9.6 percent growth reported in the previous year.

The slowdown for the quarter ended December has been attributed to aggressive monetary tightening to tame prices and a 12 percent gain for the rupee against the dollar in the past year. The rupee’s rise has dented export earnings for Asia’s third biggest economy. Farm growth rose 3.2 percent in the third quarter, down from 3.4 percent a year earlier, while manufacturing gained 9.3 percent from 11.3 percent.

JP Morgan estimates the economy will slow down further in the next financial year and expand at 7.5 percent.

India’s central bank has increased interest rates nine times since October 2004 to check inflation, which jumped to 4.89 percent for the week ended February 16 — the highest since June 2007.

“Growth stability with reasonable price stability is the main objective of our government,” Prime Minister Manmohan Singh said after the annual budget was presented Friday. Finance Minister Palaniappan Chidambaram said that he was confident the economy will grow nearly nine percent in the current financial year.

Automakers cheer tax cut plans: Shares in Indian vehicle makers rose on Friday after the government proposed to cut excise duties in the fiscal year 2008-09, which analysts say will encourage demand, particularly for small cars.

The finance minister proposed to cut excise duties on buses and chassis, as well as small cars, to 12 percent from 16 percent in his annual budget. He also cut duty on hybrid cars to 14 percent from 24 percent and on two- and three-wheelers to 16 percent from 24 percent.

Indian inflation rises to highest level since June 2007: India’s annual inflation rate spiked to its highest level since June 2007 on higher food and fuel prices, data showed on Friday.

Inflation climbed to 4.89 percent for the week ended February 16 from 4.35 percent the previous week, according to the wholesale price index, India’s most watched cost-of-living monitor.

Wholesale prices stood at a then two-year peak of 6.73 percent in the same period a year ago.

Inflation in Asia’s third largest economy has fluctuated in recent months but has been inching closer to the central bank’s ceiling of five percent for the fiscal year to March 31, 2008. agencies