Reema Sharma/Ajeet Kumar
The Union Budget 2014-15 is the first Budget that the Finance Minister Arun Jaitley is going to unveil. For the new BJP-led NDA government, challenges are abundant. The government has to walk the tightrope and do a balancing act between resorting to extreme reform push and adopting pro-people programmes.
The Narendra Modi government has the vast task to meet expectations—that of foreign investors, corporates and the common man. On one hand the new government has to get rid of high inflation regime, create jobs and remove corruption and on the other hand it has to again win back the investors' confidence and turn the wheel of growth.
The market responded positively to the new government amidst hope that it will expedite long pending reforms and make big ticket announcements. As a gesture, the markets have risen to newer highs ever since Modi government came at the helm. However, the charisma of the NDA government merely cannot hold the current rally. The government has to fulfill the promises it made on its election manifesto. This Union Budget will give a roadmap of the government's further course of action.
Just weeks before the Budget, the Central Statistical Organisation (CSO) figures showed that economy grew by 4.7% in 2013-14, shade below the original estimate of 4.9% but slightly above the 4.5% growth in 2012-13.
This is a crucial time for the government, since the estimate is going to be its yardstick to chart out the roadmap ahead.
Meanwhile, the government can certainly focus upon systemic reforms. Take for example the tax system which is nothing more than a complex web of formalities. Government needs to focus on Direct Tax Code (DTC) and implement the Goods and Services Tax (GST) regime which will make the overall system transparent, simple and accountable. The government should push through more such reforms in order to make the country an investment friendly destination and minimise corruption and procrastination in decision making.
The feasibility of the flagship programmes by the government should also be taken into account while adopting a balanced Budget. It is true that flagship programmes are more than or should be more than mere announcements. But in a country like India, it is more important to channelise these under a common banner. Without proper checks and balances and without having a proper mechanism, such policy announcements only escalate the burden on the exchequer while the poor and the marginalized class remain far from availing the benefits.
The new government will also have to be very firm on whether it should get rid of subsidies in the name of improving fiscal health or should it approach rigorous measures to push through further reforms.
Let’s for instance take the partial de-regulation of diesel prices. If government completely de-regulates diesel prices, it should come up with a mechanism to protect the marginalised classes who will suffer the most owing to cascading effect of price de-regulation.
De-regulation of diesel prices does not spell trouble for the middle classes as much as it affects the marginalised class of society.
The new government will have to extend the initiative taken by the previous one i.e, direct cash transfer with an aim to bring the major social welfare schemes under a common roof to minimise the leakages.
Since red-tapism and corruption at administrative levels impede the effectiveness of social policies, one cannot state that the government should completely stop its subsidy programmes. The need of the hour is to ensure the effectiveness of these policies. However, the government can easily scrap the flagship programmes which have totally failed.
It’s high time that the government made a balanced budget which is devoid of both populism and unreasonable reforms.
Only a pragmatic approach can make platform for a comprehensive and sustainable growth.
