All fingers crossed for today’s Budget
The Narendra Modi touch, or the “Modinomics” that is talked about, is missing from the Economic Survey document. The only thing new in the survey is the revelation that the fiscal situation is worse than what was being proje
cted by the Manmohan Singh government. A minor bright spot is the projection of the GDP growing between 5.4 per cent and 5.9 per cent in 2014-15, which is really nothing much to cheer about.
The Economic Survey, which comes a day ahead of the Union Budget, records the state of the economy in various sectors and recommends what needs to be done. If this is so, then one cannot expect much out-of-the-box thinking from Union finance minister Arun Jaitley in his maiden Union Budget to be presented on Thursday. Hopefully this will not be so as there is a mountain of hope invested in Mr Jaitley (read Mr Modi) making all the difference between the present economic slowdown and a robust turnaround of the economy in Mr Modi’s “achchhe din” mode. The stock market, which has irrationally run ahead of all fundamentals, reflecting the over-exuberance of industry over the victory of Mr Modi, is already showing signs of caution in its expectations. The Economic Survey flags the need for the government to achieve a low-inflation regime through fiscal consolidation that would lead to easing the monetary policy and, in turn, encourage investment. It shows the need to revamp the social sector and empower farmers and the poor by putting income in their hands rather than through subsidies.
The survey flags the poor delivery system being responsible for the outlay on social schemes not translating into the desired outcomes, but it does not go into a diagnosis of why industry has not performed. After all, the government had forgone revenue of a massive `5.2 lakh crore by a range of measures, including special tax rates, exemptions, deductions, rebates, deferrals and credits. Yet industry has performed dismally. It grew by one per cent in 2013 and a miserable 0.4 per cent in 2013-14, compared to agriculture that saw record food grain, oil seed and horticulture production with the granaries holding a record 69.84 million tonnes of food grain.
Should the mandarins at the finance ministry not look deeper into why industry has performed so dismally? All these tax sops, such as foregoing excise and customs duties, are given as incentives to help industry compete and grow. The growth of the manufacturing sector is vital for job creation on the scale required for a country with such high unemployment.
The government has to reverse the trend of growth with no employment that one saw from 2004 to 2013. Hopefully Mr Jaitley will have some out-of-the-box solutions to this serious situation.