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Economic Situation


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Introduction
Economic Situation
Key Objectives
Agriculture
Housing
Infrastructure
Small Scale Industry
Science & Technology
Banking
External Sector
Capital Market
Expenditure Management
PSU Reform
Revised Estimates
Budget Estimates
Indirect Taxes
Custom Duties
Direct Taxes - A
Direct Taxes - B
Closing Statement

Budget 1998-99
Budget 1997-98
Budget 1996-97

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The Economic Context

The decade of the nineties has witnessed extraordinary changes. It began with the collapse of the centrally planned economies; it is ending with market economies facing a serious crisis.
The year 1998 particularly has been a year of unprecedented global turmoil. The East Asian financial crisis took a heavy toll of important economies in the region and spread to other countries. Japan continued in recession and in August 1998 severe crisis afflicted Russia. By January 1999, the contagion had spread to Brazil triggering massive capital flight and a steep depreciation of the currency. World output growth dropped below 2%, the growth of world trade decelerated sharply, commodity prices fell steeply, currencies were savaged and capital flows to developing countries declined sharply.
In India, we had to contend with the additional challenge of economic sanctions imposed on us after the Pokhran nuclear tests. While we have not remained unaffected by these developments, we have reasons to be satisfied at the way we have withstood the impact of these challenges. Despite the hostile economic environment, our GDP growth in 1998-99 has accelerated to 5.8% compared to 5% last year. Our farmers have led the way with 5.3% growth in agriculture and allied sectors. Since the beginning of 1998-99, we have added $2 billion to our foreign currency reserves as of February 23, 1999 and we have successfully curbed undue volatility in the forex market. The current account deficit in the balance of payments is estimated at a modest 1.4% of GDP compared to 1.6% in 1997-98. Although inflation had risen sharply during the year, we have succeeded in bringing it down to below 5% now. All this is described in detail in the Economic Survey presented to Parliament a few days ago.
However, there is no room for complacency. The challenges before us, both international and domestic, remain grave. The fiscal and revenue deficits of both Centre and States are still too high and are undermining our ability to bring down interest rates, stimulate investment and growth, curb inflationary potential, generate resources for priority, non-interest expenditure needs and raise exports.
 

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