A decisive blow against poverty was struck when India's new Finance Minister Chidambaram tabled the 2004/2005 budget. India is a country on the move, with rapid economic development and dazzling dynamism in the information technology sector. Yet it is also home to 300 million of the world's poorest people. In last May's national elections, India's rural voters unseated the ruling coalition. The lesson was clear: attend to rural poverty. The new government has listened, putting forward a program that is dazzling in its implications, for India and the developing world.
India's new government is led by a veritable "dream team" of international development. Prime Minister Manmohan Singh is one of the world's leading development economists. It was Singh, serving in mid-1991 as India's Finance Minister, who began India's market reforms. He dismantled decades of inefficient and ineffective government restraints on trade, investment, and entrepreneurship, unleashing more than a decade of the fastest economic growth in India's history.
Upon returning to office this spring as Prime Minister, Singh brought into government an experienced and internationally renowned team, including Finance Minister Chidambaram, who served successfully as Finance Minister in the mid-1990's, and Dr. Montek Singh Ahluwalia, who heads the Planning Commission, the key body assessing India's medium-term public investment strategies.
When the former government lost the vote this past May, and Singh's government came into office, there were fears that Singh would be hamstrung by left-wing coalition partners, who would demand that market reforms be dismantled as the price of their participation in the new ruling coalition. Chidambaram's 2004/2005 budget puts those fears to rest. The document is a brilliant lesson in development economics: it shows how to combine a full-speed ahead approach to market reforms with urgently needed attention to poverty. In short, the budget is a model for all developing countries.