On the right budget track

India's finance minister P. Chidambaram was right not to expect pats on the back from all sides after he made his Budget Speech to Parliament this year. He knew the budget would not go down very well in the country's industrial corridors, since improving the financial health of the other half of India was his main concern this time.

Business was unhappy and vocal on hearing that the government plans to fully waive the debts of poor farmers (loans due this year). The waiver is expected to benefit about four million marginal farmers whose land holdings do not exceed two hectares. The write-off by state-owned financial institutions will cost the country's exchequer an estimated Rs600 billion (about $15 billion), Chidambaram said, adding that the plan should be fully enacted by June.

Experts regarded the budget election-oriented after detecting a ploy to please the farmers before the government of the Congress-led alliance goes to the polls in May next year. A large part of India is still dependent directly or indirectly on agriculture.

Most industrialists criticised Chidambaram's budget for being "short-term negative" because of its election-oriented populist overtone. The non-resident Indians (NRIs), as usual, felt left out again. No concessions, no special tax relief, instead a surcharge which leaves them feeling aggrieved.

Right step

But what of Chidambar-am's move - what scale of criticism is due?

The records of India's National Crime Records Bureau reveal that 150,000 farmers committed suicide between 1997 and 2005. Unofficial sources say the figure is probably double that. The farmers' suicide rate (FSR) - the number of suicides per 100,000 farmers - is also likely to be much higher than the 12.9 figure arrived at in the 2001 Census.

The number of suicides is rising at a very disturbing rate. In the five years from 1997 to 2001 there were 78,737 farm suicides, around 15,750 per year. In the next four years to 2005 the figure was 70,507, a yearly average of 17,627.

The rise in such deaths is an indication that the agrarian crisis in India has reached a stage that calls for immediate attention. These statistics surely make India's industrial sector look very selfish when they lobby so hard for budget concessions and bemoan the finance minister's "intentions" in formulating a relief package for the poor farmers.

Of course there is cause for concern in terms of how the banks will afford the loan waivers. Their lending rates may go up, leaving borrowers to carry the cost. But, ultimately, that's probably an appropriate sacrifice for the sake of the poor farmers of our country. In that sense, Chidambaram is on the right track.

In fact, loan waivers are not enough. The farmers need better irrigation, a good price for their produce and a back-up. We might look forward to all that in the next budget.