Modi 1st Budget .......Finance minister Arun Jaitley will present his maiden Budget for 2014-15 on Thursday against the backdrop of a sluggish economy, weak public finances, gathering risks on the horizon and a huge burden of expectations. For the lawyer-turned-politician like his predecessor, Jaitleys first Budget on July 10 also presents a historic opportunity for him to press the accelerator on reforms. While the Budget is seen as an income-expenditure report card of the government, the new administrations Budget is expected to contain reform measures to lift growth and get the engines of the economy roaring again. The Narendra Modi government has been voted to power on the promise of reviving the economy and tackling the menace of stubborn prices. Both global and domestic investors as well as international rating agencies are keeping a hawk eye on this most awaited event this week to get a sense of the governments commitment to reforms and whether it can walk the talk. Modi and Jaitley have signalled the need for tough measures to revive the faltering economy. The Modi administration has already raised railway fares. Jaitley has also cautioned against mindless populism. (The) fiscal deficit is a major challenge, Jaitley told a gathering last week. Now India needs a certain amount of fiscal discipline... there is hope that bold decisions will be taken now. If you indulge in mindless populism, you burden the exchequer. It does not work, he had said. While there are expectations that he might introduce some amount of tax relief for the middle class, the room for maneuvering is pretty narrow. The revenue receipts have been weak and the NDA government has made it clear that the coffers are nearly empty. Repairing the health of government finances and taking the problem of unwieldy food, fertilizer and fuel subsidies would be a key challenge for Jaitley. Here too, the prospects of weak monsoon and high global crude prices may restrict his policy choices. Economists said the Budget must clearly signal the governments policy stance on some critical issues. The NDA governments task is cut out: Revive growth, bring down inflation, practice fiscal prudence, ensure investor-friendly climate, clear policy imbroglios (retro-tax, gas, environment), said Rohini Malkani, economist at Citigroup India. The Budget is key, not just from a fiscal deficit roadmap and date-lining GST/DTC tax perspective, but also to clarify govts stance on subsidies, divestments, public welfare programmes, gold import controls, she said. Apart from measures to promote growth and tame prices, Jaitley will need to articulate the governments policy stance on reviving infrastructure, urbanization, education, health and provide timelines for critical reform initiatives for the farm sector. Liberalization of FDI in defence, railways, e-commerce would address funding constraints, improve efficiency and send a positive signal to foreign investors. Capital market reforms are likely to be promoted, said Samiran Chakraborty, regional economist at Standard Chartered Bank. While it will be difficult to present future policy direction for every sector of the economy, a broader plan to address key constraints for the economy in recent years would likely be well received, he said. The July 10 Budget presents a great opportunity for Jaitley, a veteran of many a political battle, to stamp his mark.
Posted on: Mon, 07 Jul 2014 08:01:06 +0000
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