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Indian Budget 2003-2004

Jaswant Singh, Finance Minister of India, presented the Budget for the year 2003-2004 on 28 February, 2003. Singh outlined the following five objectives of his budget as “Panch Priorities” for Indian citizens and for the economic security of the country:

  • Poverty eradication.
  • Addressing the lifetime concern of citizens covering Health, Housing, Education and Employment.
  • Infrastructure development.
  • Fiscal consolidation.
  • Agriculture and related aspects, including irrigation, and enhancing manufacturing sector efficiency, including promotion of Exports and further acceleration of the reformed process.

The Budget aims at growth — stimulate private investment, soften interest rates, increase infrastructure spend, spur agricultural growth and lower fiscal deficit. There is stress on reform in the areas of pension, tax, labour, financial sector and levy of user-charges.

Industry and services sectors alone delivered 5.4 per cent GDP growth in 2002-2003.

There is stress on competitiveness. Custom and Excise duties have been rationalised. Motor Cars, Air Conditioners, Bicycles, Pressure Cookers, Umbrellas are now cheaper. Demand for them has gone up. Similarly, foreign investment norms have been liberalised.

Reduction in tax for the salaried sector and abolition of tax on dividends in the hands of shareholders will leave consumers with more spending power. A 9 per cent Pension Scheme is now available to senior citizens. Tax rebates for senior citizens are up. The service tax rate has been increased from 5 per cent to 8 per cent. The service sector is unhappy. Value added tax is to be introduced. Traders are unhappy.

The Budget forecasts a fiscal deficit of 5.6 per cent for 2003-2004. Going by past experience, the final figure will be high.

The nominal GDP growth assumption is 11.3 per cent as against the last financial year’s 6.7 per cent. This is considered ambitious.

The Revenue growth at 7.2 per cent looks reasonable, but is optimistic as actual receipts were lower in 2002-2003 than the budgeted figure.

Growth in Government expenditure is pegged at 8.6 per cent, but the rise was 11.5 per cent last year.


Analysing the Union Budget 2003-04 with a special focus on infrastructure, the Budget is designed to augment industrial recovery. It has recognised the urgent need to supplement India’s skills in technological innovations in the field of manufacturing with world-class infrastructure.
There is a need to adopt a combination for expenditure control and revenue enhancement measures to get Government finances in order.
Ashok Lahiri, Chief Economic Advisor to the Ministry of Finance and Company Affairs


We at CII expected a growth oriented reformist Budget from the Finance Minister. But we couldn’t imagine the extent to which he would take the reform process forward... takes into account almost all of CII’s recommendations.
Ashok Soota, President, CII

Textiles, Garments, Apparels, Textile Machinery, Health Care, Information Technology, and Construction Industries have been given a boost.

Capital markets’ reaction is mixed. The boost to infrastructure is a positive step.

According to Jayanti Ghosh, Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi, the Budget is not women-friendly as has been claimed by the Finance Minister. Singh has claimed that he has tripled the amount of allocation for women-specific schemes. In reality, according to Ghosh, these schemes don’t help women. The worst drought in the country has meant loss of income, which means rural households get less to eat and, when this happens, women and the girl child suffer the most. Drought also means less employment in the agricultural sector. The need is for expansion of public employment programmes directed towards employing more women, which has not happened.

Omkar Goswami, Economist, CII, describes the Budget as “clever”. Writes Goswami in Communique, a journal of the Confederation of Indian Industry: “Often ‘clever’ is a word that is used disparagingly. It is not so in describing the Union Budget for 2003-2004. It is, indeed a clever Budget. The Finance Minister has made the space to give some concessions to several sections of society and business; he has belied the fears of most people post Kelkar’s direct tax proposals; he has focused on some areas of infrastructure; and he has outlined an integrated vision of accelerated economic growth … And all of it has been executed at a low cost.

“It’s a clever Budget for it cut the coat according to some fairly meagre cloth — and made the customer feel that he was being dressed as a prince, if not a king. Now, that’s Realpolitik for you.”

Everyone appears to be happy. Are you?

A. C. Patankar
Principal Advisor
Confederation of Indian Industry