Prof.M.K.Bhat
The common man voted for a change and aspired for price reduction and jobs from the budget 2014-15 of the new government. He is least interested in the financial jugglery behind the curtains or the pulls and pressures which any Finance Minister has to undergo. He neglects that a Finance Minister has no magical powers to change things overnight. The fact is that every Finance Minister has to walk on a tight rope as on the one side are the expectations of people and on the other, he has to make road for future growth. This makes imperative for him to fully prioritise his plans for the economy. He can galvanize on what he has got in his kitty. This was very well deliberated by finance minister, Mr. Arun Jetley in these words “the prevailing economic condition presents a great challenge. It calls for a conscious choice to be made by all of us. Should we allow this drift to carry on and watch helplessly? Should we allow our future to suffer because of our indecisiveness? Should we be the victims of populism or wasteful expenditure?”
Any introspection of budget 2014-15 may be biased unless one understands the compulsions with the present finance minister. He inherited a weak economy struggling at less than 5% growth rate from last two years. In 2013-14 industry grew at a rate of 0.4%, the mining sector too was sluggish. The investment culture had drifted to its low level. This can be better understood by the World Bank study on ease of doing business 2014. It had put India at 134th rank out of 189 countries. Government had become non functional. Its indecisiveness was taxing the economy badly. The external environment is not encouraging due to the ongoing turmoil in West Asia – oil exporting countries to India (oil bill is highest in our total import bill) and above all high price level especially in food items. The low monsoon too has impaired the sowing of Kharif crop.
The finance minister has chosen not to come out with short term populist measures rather he has stressed on macroeconomic environment to put the economy back on the track so that it can rise on the growth trajectory and make jobs for people. This budget in other words has laid a firm foundation for better economics in the years to come. It has not reduced expenditure on social sector which indicates the concern shown by Modi government for the lower sections of society. It has tried to maintain the middle income group within its fold by giving rebate on electronic items, tax rebates for salaried class and tax holidays and reduction in excise duties will boost the business class. The youth may rejoice from this budget because of its stress on skill development which may help them to get their entry in the job market.
It has taken a few steps to boost the investment by opening the defense and insurance sector to foreign players upto 49%. The emphasis on construction, manufacturing and infrastructure will boost the growth and may be helpful in creating more jobs. The establishment of economic corridors and central government’s decision to integrate the services of various ministries with e biz single window system will be a big solace to private players. It may save their time and energy.10000 crore funds for providing equity through venture capital funds to encourage new startups is a welcome step.
The participation of private sector in infrastructure like roads, ports will boost economy for attaining higher growth rate of more than 7% after three years. The public private partnership (ppp) may go a long way in reviving manufacturing and infrastructure sector. Although India has grown into a big PPP market with 900 projects in various stages of development but caution is also needed for the misuse of this type of participation .It shall not result in the loss of exchequer by way of crony capitalism.
The failure by the earlier government to control inflation was responsible for Narender Modi to be in his seat. Inflation is getting gigantic day by day and the budget 2014 carries a little that may help to control prices in the short run rather it may not be out of context to say that escalation in service taxes will lead it to a higher level. To think of household investments for industrial development by way of Kisan Vikas Patra will be a wishful thinking unless inflation is controlled.
The finance minister has tried to address his problem by way of containing fiscal deficits at 4.1% which seems a tough task due to low growth rate, subsidies, static industrial growth and escalation of indirect taxes. The disinvestment upto 63000 crore will help a lot in this perspective. The budget recognized the need for scrapping the agriculture produce marketing committee (APMC) act .This may help the small and big buyers to buy from the farmers directly. Coordination with states is required to modify the APMC act which makes farmers to sell their produce in ‘Mandi’ only. This may help farmers to get due price of their product. Cracking on hoarders and minimization of brokers falls in the state list so the responsibility of states is equally important in curtailing inflation. The share of commission agents, whole sellers and retailers in fruit and vegetables prices stands at 30 to 50 % which is quite high.
The food inflation at 9.5% at present can be controlled only when agriculture produce will rise, the various monetary measures adopted by the previous government have yielded a little in this direction. The supply side reforms in agriculture can go a long way in reducing food inflation. Private sector needs to be encouraged for creating infrastructure facilities like ware housing as 15 to 30 % goes to wastage in fruits and vegetables. While realizing the need for curtailing wastage union budget has laid stress on developing ware housing for post harvest- an allocation of 5000 crore for warehousing infrastructure fund will be created.
There is a drastic need for improvement in the public distribution system which at present has nearly 40 % leakages. Budget 2014-15 has hinted at taking steps to improve agriculture marketing and restructuring the food corporation of India. To increase investment in food processing sector the excise duty has been reduced from 10 to 6%.The government proposes to link markets across country for more efficient trading of food items, a national market for farm produce will be setup. Rs500 crore price stabilization fund will help farmers to face price volatility and interest rate will be lowered by 3% on farm loans for timely payment .In order to meet the vagaries of climate 100 crore has been kept as national adaptation fund. Besides the establishment of agricultural institutions, the budget has gone for soil health card mission with Rs.100crore and Rs. 56 crore will be setup for mobile soil testing laboratories across the country .Soil testing can help farmers to reap better productivity.
Indian farmers have little financial capability; this hinders them from applying science and technology they usually fall prey to money lenders. The need for funds felt by farmers has been well recognized by the budget, a target of 8 lakh crore for agriculture credit during 2014-15and Rs.50000 crore for rural short term credit have been allocated .The ambitious target of 4% growth in agriculture in the form of second green revolution including protein revolution can be possible only if irrigation problem is solved. The interlinking of rivers can go a long way in this direction. The union budget has rightly allocated1000 crore under ‘Pradhan Mantri Krishi Sinchayee Yojna’ for this purpose.
The budget clearly defines the future perspective of the present government. It is growth oriented but how it will contain the expenditure will be a big task. Its silence about the various measures to control black money makes things dicey for the common man. Curtailing black money can control inflation and many other problems, let us wait for monetary policy of Reserve Bank of India to address this issue.
(The author is Deputy Director (MAIMS) Guru Gobind Singh Indiraprastha University Delhi)
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