The Indian Budget 1996-97 The Indian Economy Overview


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Basic Minimum Services

  1. One of the first acts of the Prime Minister, Shri Deve Gowda, was to convene a meeting of Chief Ministers on Basic Minimum Services. This reflects the resolve of the United Front to "advance the principles of political, administrative and economic federalism". The Chief Ministers' Conference recommended adoption of seven objectives to be attained by the year 2000. These are 100% coverage of provision of safe drinking water; 100% coverage of primary health centres; universalisation of primary education; public housing assistance to all shelterless poor families; extension of the mid-day meal scheme; road connectivity to all villages and habitations; and streamlining the public distribution system targeted to families below the poverty line.

  2. These objectives are now being served by Centrally-sponsored schemes and schemes in State Plans. Hon'ble Members will be glad to know that I am providing an additional amount of Rs.2,466 crore as Central assistance for State and UT plans to significantly increase the availability of funds for these schemes. From this amount, it is our intention to allocate about Rs.250 crore to provide shelter and other basic amenities to slum dwellers. The distribution of this enhanced allocation across the seven schemes and across States and Union Territories will be determined by the Planning Commission in consultation with them.

    Infrastructure Financing

  3. The Update of the Economic Survey has highlighted the enormous challenge on the infrastructure front. The state of our infrastructure - particularly power and roads - is very poor. We cannot sustain a 7 per cent growth unless we can revitalise these infrastructure sectors. Huge funds are also required for telecom, railways and ports.

  4. Infrastructure needs long-term finance, typically 15-20 year financial instruments. However, it has not been possible to float such instruments in the Indian market so far. Hence, I am proposing the establishment of an Infrastructure Development Finance Company (IDFC). This company will be incorporated with an authorised share capital of Rs.5,000 crore. The Central government, the RBI, banks and financial institutions will contribute to the share capital. I am making a budgetary provision of Rs.500 crore in the current financial year as the contribution of the Central government. The RBI's initial contribution to the share capital will also be Rs.500 crore. Among other things, the IDFC will act as a direct lender, as a refinancing institution and as a provider of financial guarantees. I believe that the IDFC will induce investors, both Indian and foreign, to make available long-term funds at the lowest possible market rates.

  5. I am also proposing some tax incentives for infrastructure investment which I shall outline later.
  6. Hon'ble Members are aware that the Central government has already set up the National Highway Authority of India. We need a world-class national highway system in place very quickly. I have decided to provide a sum of Rs.200 crore to strengthen the capital base of the National Highway Authority of India. The Authority will now be in a position to leverage resources for highway development from both within India and from outside.
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