Arun Jaitley’s Budget unlikely to unveil populist schemes
2 min read . Updated: 04 Jul 2014, 08:20 PM IST
PremiumFiscal consolidation, infrastructure and a reasonable and stable tax regime could well be the focus for Jaitley
New Delhi: Tough fiscal consolidation measures, few, if any, populist schemes, an emphasis on infrastructure, and a move to a reasonable and stable tax regime. If finance minister Arun Jaitley’s speech at a function in New Delhi on Tuesday is any indication, these could well be the focus of the Union budget he will present on 10 July.
The budget is expected to shed light on the economic ideology and priorities of the Narendra Modi-led National Democratic Alliance government that swept to power with a clear majority in May.
Since then, there has been much speculation about the kind of budget—an annual statement of accounts and policy agenda rolled into one—Jaitley will present. Convinced about this government’s free-market and business-friendly credentials stock markets and business confidence have both risen in the run-up to the budget.
The budget is unlikely to unveil populist entitlement-focused schemes of the sort popularized by the previous Congress party-led United Progressive Alliance (UPA) government. Results of last year’s state elections (where the Congress lost in all four key states) and this year’s general elections have shown that these schemes do not work, Jaitley said.
The finance minister summed up the challenges facing the country—slowing growth, widening fiscal deficit, inflation that is still high although it has moderated, the crisis in Iraq that threatens to cause a spike in oil prices, and a poor start to the monsoon—but added that all of these could be tackled.
The economy expanded by 4.7% in 2013-14, holding near a decade low; fiscal deficit in the first two months of the current year has already hit 45.6% of the full-year target; and food inflation was 9.04% in May.
Emphasizing the importance of reviving the investment cycle, Jaitley said this could be done by building the required infrastructure, improving the decision-making process, putting in place a reasonable tax regime, and making sure there is the “prospect of profitability" for investors.
The UPA government has been criticized for its mismanagement of the economy especially in its second term in power between 2009 and 2014, a period when it was also besieged by a series of corruption scandals. The investment climate in India suffered as a result of high inflation, which the central bank tried to combat with a tight money policy that hurt growth; a slow and extended decision making process that delayed important approvals and clearances for industrial and infrastructure projects; and a fickle tax regime.
There has been a renewal of interest in India, Jaitley said, and the government has to “respond to the new opportunity."
It is possible he may announce specific measures addressing all of these on 10 July.
