The 2013-14 Budget will be presented when the Indian economy is going through one of its most difficult phase. The 2012-13 Budget had forecast a growth rate of 7.6% and an inflation rate of 6.5%. In the first half of 2012-13, the economy grew by around 5.3% & likely to be almost same in the second half of the year.
Despite having difficult situation in the economy, whether in terms of fiscal deficit, high current account deficit, double digit consumer inflation & weak global conditions, the Indian economy has managed to grow above 5%. Although 5.3% GDP is much lower than the comfort level of 8% to 9% which was achieved during the period 2006 to 2011 but still better than other peer group countries.
This is the time, when the budget should come with such progressive measures that at least it will shows a direction to tackle with current situation and revive the spirits in the economy.
Education is one of the important area in which attention of the Government is required. What lacks in our education system is the basic facilities (like infrastructure, trained educators, use of latest technologies), practical exposure on subjects etc. Unless & until the country has proper education system, it will be difficult to have skilful man force as a final product on which future of the economy depends.
Agriculture sector should also be in focus in the budget because more than half of the population & manufacturing sector majorly dependent on it. There should be proper allocation of money towards research & development especially in new technology/innovation, which will help the agriculture sector to grow. The more technology will be advanced; better will be the quality of the product with the same inputs and reduction in the wastages as well. As far as export sector is concerned, apart from various incentives new technology and innovations are also required for exporters in order to become more competitive in the global markets.
The only way to reduce current account deficit, which is mainly due to high import of gold, coal, and oil, is to give boost to our export sector and discourage gold import.
The budget will also watched for measures which will build strong supply chain in the market (better transportation, storage facilities) and relieve supply side pressure on inflation.
The budget should include attractive tax saving schemes, increasing existing bracket of tax savings i.e. section 80C, reducing the lock in period of 5 years for investment in fixed deposits etc. With the introduction of such schemes, huge amount of money from the public will get invested, which results in less availability of money with public. This will relieve demand side pressure on inflation and also bring overall upturn in investment cycle thereby positive impact on the growth as well.
IIP numbers announced on 12th Feb 2013 also showed weakness in industrial sector especially with negative growth of 0.7% in manufacturing vis-à-vis positive growth of 2.8% in the same month in 2011. Therefore the Union budget should refrain from raising any taxes or duties and introduction of new taxes.
As far as fiscal consolidation is concerned, it is necessary to cut down spending on non productive schemes and to redirect Government spending towards productive purposes that can stimulate the economy, thereby generating more jobs and incomes. The MNREGA scheme, direct cash transfer of subsidy, deregulating fuel prices, cap on LPG cylinders, deferment of GAAR provisions are some good steps by the Government towards the growth of the economy.
Initiatives such as implementation of GST and DTC which should have been introduced much earlier are implemented without much delay.
There is no doubt that India is one of the fastest growing economy in the world but to become a developed country, the Government should take quick action on policy reforms along with its proper implementation & execution rather than waiting for critical situation to come.
Name: Amit Dobhal