Mr. Narendra Modi the new Prime Minister of India has repeated the mantra of “sab ka saath sab ka vikas” (collective efforts inclusive growth) more than thousand times in his various election rallies. After shifting into 7 RCR in the month May the Modi government took one and a half month to start with the first biggest task and the most important for the country. On 10th of July Finance Minister Mr. Arun Jaitley presented the first union budget made by the newly elected NDA government. It is Mr. Modi who has made various promises to the people of the country, who have given them a hope, who has escalated their expectations to greater heights. Now it is the time to deliver the promises and keep up with the higher and higher expectations of people. This is the toughest task since Indian economy is facing one of the most vulnerable times since independence and that is the reason India has voted for the new government, for the change. Let us analyze whether the new government is keeping up with their mantra and meeting the expectations of people or they are just following the same path which UPA government has drawn.
Mr. Jaitley has clearly stated the objective and concerns while framing the budget “Two years of sub-five per cent growth in the Indian economy has resulted in a challenging situation. We look forward to lower levels of inflation as compared to the days of double-digit rates of food inflation in the last two years. The country is in no mood to suffer unemployment, inadequate basic amenities, lack of infrastructure and apathetic governance. The task before me today is very challenging because we need to revive growth, particularly in manufacturing and infrastructure to raise adequate resources for our developmental needs. On the other hand, the task is simple if we accept the principle that we cannot spend beyond our means. We need to introduce fiscal prudence that will lead to fiscal consolidation and discipline.” (Jaitley, 2014)
The task for the government is very clear they need to bring the growth while get rid of the inflation. It not a very easy task because the economy is facing huge economic crisis and the government has to manage with the limited resources. The fiscal deficit is more than 4 percent and revenue deficit is more than 3 percent of the GDP. Middle East Asia is disturbed and it will have a huge effect on the external sector of India. With keeping all this in mind government has laid down the budget. On a positive note let’s start with taxation issues. The government has promised they will introduce the much-awaited Goods and Service Tax (GST) within a year’s time. At the same time, the government is going to solve the issue of retrospective taxation with caution. The tax slab for direct taxes has been increased and the exemptions are also increased which has given a bit of relief to the general public. In indirect taxes, the government has given many concessions to the manufacturing sector. The custom and excise duties have been lowered for many items. This may be a good news for the beneficiaries but how viable are such decisions when the country is already facing a huge revenue deficit is a debatable issue. Though the government has said they will increase the tax revenue by increasing the tax base the details of how they will do it are not given.
The government has shown the good gesture for Foreign Direct Investments (FDI). They are focusing on FDI for the manufacturing sector, real estate, smart cities, insurance, infrastructure, and defense. The government has shown a good intent by promoting FDI for sectors where it helps the larger interest of the Indian Economy. But attracting FDI in such sectors will be a difficult task for the government. Government is thinking of bringing the FDI in housing sector so they can start working on PM’s dream of housing for all by 2022. For the same reason, they have proposed the cheaper credit availability for housing and have given an extended exemption for house loans in income tax.
The good amount of focus has been shown on agriculture and manufacturing sectors as this is a key to achieve inclusive growth. Government is going to spend a huge amount on infrastructure building, rail-road, port-road, and port-rail connectivity. They have proposed various industrial corridors across the country which will help to increase the manufacturing output. At the same time, they have allocated funds for Micro Small and Medium Enterprises sector (MSME). India is country with many MSME companies which are sick and need immediate attention. This move of government will help the weaker section of the economy. It will help in boosting the growth of the secondary sector which mostly employs semi-skilled and unskilled workers. Infrastructure development and especially focusing on the energy sector will help the industry as well as the public at large. The industry will get uninterrupted electricity and better supply chain because of improved road rail and port conditions at the same time people will get electricity and road connectivity in their areas.
For agriculture sector government has allocated funds to modernize the practices. To make farming competitive and profitable government is focusing on investments in agro-technology and agri-business infrastructure. The availability of agriculture credit at a cheaper rate and for landless farmers also under ‘Bhoomi Heen Kisan’ programme is a recommendable job of this government. Water resource management, irrigation development, and river linking will help the agriculture sector and farmers to a greater extent. This will help people getting good drinking water too. Re-orientation of APMC Act and boosting free market environment will help farmers, corporate and public at large. This will help in reducing the extra cost associated with food items and commodities and lower down the food inflation. The government has allocated a good amount of money for agriculture universities. I personally feel not just setting up universities but making them work for the betterment of farming and the farmers will help the country to great extent. They have allocated huge funds to build IIMs and AIIMS in various states which will result in better academic standards for higher education. Modi government perfectly knows that mere focusing on higher education will not help the country a lot and that is why they have also focused on elementary and secondary education as well as teachers’ training programs.
Though more was expected for primary health care facilities government has focused very well on the betterment of women in the country. They have allocated various funds for women safety, women education, and women empowerment. By promoting a programme called ‘Beti Bachao, Beti Padhado Yojana’ the government is trying to reduce the gender discrimination in the country. They have allocated some money for a senior citizens pension fund too.
The government has not given any specifications about how they are going to rationalize the subsidies or reduce the revenue expenditure. The government will still continue with some of the flagship programs of previous government like Food Security and Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). Hope this government will make good use of such developmental programmes in uplifting poor out of poverty. In the banking sector, the government will infuse the capital in a phase-wise manner to fulfill the requirement of Basel III norms. Government is trying to include as large as possible section of the society under the formal financial system. Though financial inclusion programme was initiated by previous government and RBI jointly, this government is continuing with it.
The government has paid a good attention to promote the tourism industry in India. The idea of creating tourist circuits, highlighting pilgrimage and spiritual travel, developing national heritage cities and helping Goa to become international tourist spot with world-class convention facilities will surely help to boost the growth of the tourism industry. At the same time, the tourism industry is a great source of employment generation for various sections of the society and it will help even weakest section of the society to earn money. The government has focused on one very important and strategic issue by allocating funds to North East India. The refocus of the government of India on the development of North Eastern states and developing their infrastructure will surely help the country to a great extent in coming future.
By and large, this budget has tried to address almost all the issues in the country with limited resources available. This is a great piece of macroeconomic understanding of the current government. Though it not very sure that all the plans of this government will work out successfully but at least it has shown the intent of the government towards growth and development. If Modi government gets success in implementing for what they have allocated funds in the budget in an efficient manner they will surely justify their another mantra of “sarvepi sukhinah santu” (may all be happy).
References
Jaitley, A. (2014). Budget Speech. New Delhi: Ministry of Finance, Government of India.