The People's Budget of 2005: Building an inclusive India

When a nation grows, it must uplift every citizen. On February 28, 2005, Finance Minister P. Chidambaram presented the "People's Budget," a landmark that prioritised rural empowerment, inclusive growth, and social equity. Anchored by transformative initiatives like Bharat Nirman and the National Rural Employment Guarantee Scheme (NREGS), this Budget addressed the glaring urban-rural divide, committing to improved infrastructure, gender equity, and social justice. At a time when India's economic growth was soaring, the 2005 Budget reminded the nation that true progress lies in leaving no one behind, paving the way for a more equitable and prosperous Bharat.

The historical context: Bridging two Indias

In the mid-2000s, India's economy was booming, with GDP growth averaging over 7 per cent. Yet, this rapid expansion left rural India behind. With over 60 per cent of the population residing in villages but contributing merely 20 per cent to GDP, the urban-rural divide was glaring. Agrarian distress, rising unemployment, and inflation compounded the challenges.

Guided by the National Common Minimum Programme (NCMP), the United Progressive Alliance (UPA) government aimed to address these disparities. Chidambaram opened his Budget speech with conviction: "This Budget seeks to translate our promises into action."

Key highlights: A Budget for the people

Bharat Nirman: Building rural India

The ambitious Bharat Nirman initiative was launched to transform rural infrastructure. The six pillars of this programme included:

• Irrigation: 10 million hectares of additional irrigation potential.
  
• Roads: Connecting all villages with over 1,000 people by 2009.
  
• Housing: Building 60 lakh houses for the rural poor.
  
• Electrification: Providing electricity to 125,000 villages.
  
• Drinking water: Supplying safe water to 74,000 habitations.
  
• Telecom: Expanding rural connectivity.

This programme marked a bold step in bridging the rural-urban gap.

Indirect tax reforms

The 2005 Budget introduced significant changes to indirect taxes, including the landmark implementation of Value-Added Tax (VAT) at the state level, replacing the cascading sales tax system with a transparent and modern framework. This historic reform, effective from April 1, 2005, aimed to streamline taxation across states, with the central government promising compensation for any revenue losses. Additionally, the peak customs duty on non-agricultural goods was reduced from 20 per cent to 15 per cent, and key sectors like textiles, food processing, and pharmaceuticals saw reduced duties on machinery and inputs, enhancing competitiveness and aligning India's tax structure with global standards.

Direct tax reforms

Income tax exemption limits were raised to Rs 1,00,000 for individuals, providing relief to lower-income groups. For domestic companies, the corporate tax rate was reduced from 35 per cent to 30 per cent. Aimed at increasing voluntary compliance, procedures were simplified, while a focus on improving tax administration ensured better enforcement.

National Rural Employment Guarantee Scheme (NREGS)

The Budget introduced the NREGS, promising 100 days of guaranteed employment annually to rural households. With an initial allocation of Rs 11,000 crore, this scheme became a lifeline for millions, addressing rural joblessness and poverty.

Chidambaram passionately asserted, "Work, not charity, is the best antidote to poverty."

Gender and social equity

For the first time, the Budget prioritised gender budgeting, with Rs 14,379 crore dedicated to women-centric schemes. It also provided targeted allocations for Scheduled Castes and Scheduled Tribes, empowering historically marginalised communities.

The introduction of the Rajiv Gandhi Fellowship opened doors for SC/ST students pursuing higher education, reflecting a focus on equity and opportunity.

Health and education: Investing in the future

Allocations for Sarva Shiksha Abhiyan surged, taking the total education Budget to Rs 18,337 crore. Health initiatives received a massive boost with Rs 10,280 crore allocated for launching the National Rural Health Mission, aimed at improving access to healthcare in underserved areas.

Striking numbers with legacy

The total Budget expenditure was estimated at Rs 5,14,344 crore. Plan expenditure rose by nearly 17 per cent, with Rs 1,72,500 crore allocated for developmental priorities. The rural employment guarantee programme alone promised to uplift over 4 crore households.

A vision for every citizen

"The purpose of governance is to create opportunities for every citizen to thrive." Chidambaram's words encapsulated the essence of the 2005 Budget. It was more than a fiscal exercise; it was a commitment to building an equitable and prosperous India.

The People's Budget stands as a timeless reminder that inclusive growth isn't just an aspiration - it is a necessity for true progress. Its vision of empowerment, equity, and infrastructure remains as inspiring today as it was then.

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