Indian FM plays safe with budget.

CALCUTTA, India, Feb. 3 (UPI) -- With general elections looming just round the corner, India's Finance Minister Jaswant Singh presented the government's budget Tuesday, painting a rosy picture of the country's economy in an effort woo the country's middle class polity.

Such election-year budgets seek an interim spending authority before the country's Parliament dissolves, which in this year will happen on February 6. Therefore, this budget will only have interim authority during the next four months when the country chooses a new government.

"Economic growth indices, in the current year, are very encouraging," said Finance Minister Singh, "With inflation at 4 to 4.5 percent, this year we expect the growth rate of our GDP to be between 7.5 and 8 percent. Though, there are higher growth estimates that have been made, for the present, we prefer to remain with the cited figures."

According to Singh, "this level of growth is a matter of great satisfaction", which has spurred him to adopt "bold initiatives in infrastructure and simultaneously lay the foundation for additional quality employment across a broad spectrum of economic activity to meet future challenges."

But, that the forthcoming elections were on the top of Singh's mind was evident from the slew of sops he offered for the common citizens and farmers. Singh said that he choose not to make any changes to the existing income tax and other direct taxes structure, and preferred to retain, which foreign agencies like Standard and Poor called "the high interest rates" of savings instruments, which are most popular with small savers.

To appease the federal employees, who incidentally form a significant portion of India's voting population, Singh announced salary hikes that would entail a collective wage increase of around $1 billion over the next two months for the federal coffers.

On the business front, Singh said that he chose to concentrate on "agro-processing" industries like tea and sugar, and the agriculture sector in this budget because these "employ a large number of our citizens." The measures for these industry sectors included reduced bank loans and a promise of special packages going forward.

"The government will prepare a package for the revitalization of these industries, in consultation with all the stakeholders," Singh said adding that as a measure of temporary relief, restructuring of loans taken by these sectors will be examined by the lending agencies, including banks.

Although Singh also tried to woo the stock markets and foreign institutional investors by announcing a continuation of long-term capital gains tax exemption, the country's stock markets greeted this with a yawn.

The benchmark index Sensex lost close to 100 points- about 1.8 percent- just after Singh finished presenting his budget. But the Sensex inched up a bit to finally close 75 points lower than the opening level. "We were expecting the continuation of the capital gains tax exemptions," said a broker at the Bombay Stock Exchange. "So, the markets were not enthused by the announcement. But we were also hoping that the FM would have some more good news for the markets."

Still, while the stock markets and the political opposition were steadfast in believing that "the budget is for the election and not for its citizens and the economy per se," prime minister Atal Bihari Vajpayee was confident that the interim budget takes India a step forward to becoming a developed nation by 2020.

"The budget has addressed all sections of society, and has vindicated that the economic situation is improving and I am confident that this budget will help in meeting immediate targets besides facilitating achieving future targets," Vajpayee said.