The Indian Budget 1996-97 The Indian Economy Overview


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Employment and Poverty Alleviation

  1. Decades of development experience from dozens of other countries confirms our own experience that rapid, broad-based, labour-intensive growth is the surest route to alleviating poverty and giving dignity and voice to the poor. To achieve this kind of growth we need to promote high levels of domestic savings, encourage their allocation to the most productive uses through well developed financial and capital markets, ensure that our foreign trade policy promotes rapid growth of labour-intensive activities and exports in all sectors, (manufacturing, agriculture and services), reduce monopolistic elements in all markets and provide efficient infrastructure and other supporting services to all economic units, especially small scale manufacturers and small holder cultivators.

  2. In addition to implementing policies for promoting employment-intensive growth, the government should strengthen programmes for primary education, primary health care, safe drinking water, housing, rural roads, public distribution system and other social services so that they are fully effective in benefitting the poorest segments of society. Such programmes for building the capacities and skills of the poor constitute effective ways of lifting them from poverty. Furthermore, existing special programmes for employment generation and poverty alleviation need to be strengthened and revamped to increase their effectiveness and reduce waste and leakages. Strong government support, financial and administrative, for these programmes is substantially dependent on maintaining rapid and sustained economic growth, which alone can yield the fiscal resources necessary for social and anti-poverty programmes.

  3. With two-thirds of India's labour employed in agriculture, successive Economic Surveys have emphasized the crucial importance of broad-based agricultural growth in raising rural living standards, ensuring basic food security for the nation and strengthening the domestic market for industrial and service sectors. Above all, broad- based agricultural growth offers enormous opportunities for alleviating rural poverty through expansion of on-farm and off-farm employment. To succeed in this endeavour public policies for agriculture must continue to reduce the bias against agriculture in the overall incentive framework through reduction of protection to industry and other means, strengthen social and economic infrastructure in rural areas, revamp rural credit delivery systems and find ways to spur quick completion of ongoing irrigation projects. Irrigation and sound water-management practices will become increasingly important to the health of the rural economy as the demand for water outstrips supply. Provision and maintenance of irrigation services must be more responsive to the needs of farmers, especially small holders. At the same time beneficiary farmers must be willing to bear a reasonable proportion of the cost of irrigation services.

  4. The search for strategies to accelerate the growth of employment and the rate of poverty reduction must accord due importance to the services sector. All over the world the services sector has become a dominant source of new jobs for both skilled and unskilled labour. We must review and reform policies which today hinder the expansion of job opportunities in key sectors such as construction, retail trade, tourism and a wide range of maintenance services.

  5. India's economic development must harness the opportunities provided by international trade, modern technology and world capital markets. China has shown how $30 - $40 billion a year of foreign investment can be effectively harnessed for economic development without compromising sovereignty and national interest. We must swiftly reform our policies to give effect to the goal of attracting $10 billion of foreign direct investment in a year. At the same time we must remember that foreign investment, like all other capital inflows, has to be serviced. And this will require continued strong growth in our exports of goods and services. In the final analysis, policies which ensure sustained and rapid growth of our exports constitute the best guarantee of our self- reliance and the viability of our external sector.

  6. To sum up, the potential for sustaining and even improving on the rapid growth of the last two years exists. But to convert this potential into reality we must pursue policies which ensure higher savings and investment, reduction in fiscal deficits at both Central and State levels of government, a sharp increase in investment in and productivity of key infrastructure sectors such as power and a sustained and rapid growth of exports.
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Published by The Government of India, Ministry of Finance, Economic Division.

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