South Asia Monitor: India Budget 2001: Can the Government Deliver - April 1, 2001

April 1, 2001

On February 28, 2001, Indian finance minister Yashwant Sinha presented a $80.5 billion budget widely hailed as the budget that will help start the second wave of reforms. It promised government "downsizing," cut government administered interest rates, eliminated tax and tariff surcharges, raised the target for disinvestment from government-owned industry, and even proposed new labor legislation. It also pledged a major push to reform the struggling electric-power sector. Three weeks later, however, a defense procurement scandal provoked the departure of one small party and four ministers from the government. Although the budget itself will eventually pass, the government will now have to devote considerable time to rebuilding a national consensus before it can hope to pass the companion legislation on which many of the "second generation" reforms depend. At best, the schedule for reform will be considerably stretched out.