Economics For Achhe Din
Thomas Paine, the renowned English-American political activist, philosopher and political theorist, said: “We have it in our power to begin the world over again.” But the successive UPA-1 and UPA-2 governments seemingly did not. They tweaked the world a little bit here and a little bit there, hoping for revolutionary change. Where they should have been bold, they had been submissive. Where they should have looked at the future through new eyes, they merely leafed through the pages of the past. Where they should have broken the calcified layers of economic policy, they merely chipped hesitantly at dead skin layers at the top. But the Railways and General Budgets, made of sterner stuff, presented by the NDA government last week, have infused a ray of hope into the hearts of the people of the country, as they leave no stone unturned to create a vibrant India.
The Railway Budget outlines the tough challenges for itself and the nation ahead. It is very heartening to note that the government has recognised the importance of Railways in national progress. The existing Rail terminals in major cities are saturated and Railways are going for satellite terminals. The budget is filled with lots of plans and proposals like introduction of high speed bullet trains, WiFi connectivity at stations and select trains, food packets, purified water, introduction of new trains along existing routes etc. The railway industry is hugely capital intensive with freight business making passenger service affordable. But India’s poor infrastructure and vast population demand that India has an extensive, efficient, eco-friendly, integrated road/rail/sea and river navigation/air transport infrastructure. Without it the financial and ecological costs would be too high.
On the other hand, Finance Minister Arun Jaitley allocated thousands of crores on projects such as 100 smart cities, Ganga river project, sports university, total sanitation, Deen Dayal Upadhyaya Gram Jyoti Yojana to augment power supply in rural areas, AIIMS, IIMs, agri-infrastructure fund, modernisation of madarsas, technology development fund, on improving weather infrastructure, on war memorial and war museum, on preserving heritage characters of cities like Mathura and Agra, on interlinking of rivers, etc. It is worth mentioning that the NDA government has inherited the worst economy that was possible. Although the government is ready to take bold initiatives, the prevailing economic conditions and failing monsoon might restrict the new government to take bold decisions. Against this backdrop, it is noteworthy that the government aims to achieve 7-8 per cent economic growth rate in next three-four years, for which there is urgent need to generate more resources. Although, the target of 4.1 per cent fiscal deficit is daunting, the government has accepted it as a challenge. In this perspective, Expenditure Management Commission will be constituted to look at expenditure reforms and also overall subsidy regime will be reviewed, especially food and oil. Rs 500 crore have been provided for rehabilitation of displaced Kashmiri migrants. These steps should be appreciated as these steps, which are only the first steps and directional, will spur the economy. The budget allocated Rs 2.29 lakh crore for defence and proposed 49 per cent FDI in insurance and defence sectors. The maiden budget of Arun Jaitely is a balanced one and his focus on 100 smart cities, FDI and subsidy management deserves appreciation. In the days to come, we can expect that it will cleanse the ills of financial indiscipline and ensure better standard of living to all sections of society particularly the poor of the poorest of India. However, the Finance Minister did miss an opportunity to raise additional resources by taxing the rich, broadening as well as rationalising the wealth tax, reintroducing estate duty or inheritance tax. Furthermore, reliance on PPP mode has its own pitfalls as it comes with a bloated cost to the end-user and, more importantly, it is not easy to find right partners with their own massive resources.
A budget of mixed bag with full of ideas and substance, the NDA budget is definitely good at least in intent and direction and lives up to the expectations. A conducive atmosphere of taxation for industries to spur growth and lowering the tax rates and widening the tax base is a progressive step to increase the revenue accrued. With the economy better guarded from external pressures, it is time for India to scale back higher rates of growth from the sub-optimal performance in the preceding two years. However, much more focus would be required in future budgets to boost agro and industrial sectors. Much need to be done in promoting E-governance including helping states in setting and maintaining systems. But to expect that the new BJP government will come up with concrete plans within a month or so of taking office to solve all problems is nothing short of self-delusion. The feckless Congress government had been tolerated for 10 long years. Even if the confidence of investors (whether foreign or domestic) is restored, the problem is half-solved. Let us hope this budget will restore the faith of all sections of society in the government.