Budget 2015-16: Big bang reforms needed

In the course of his campaign for the 2014 Lok Sabha polls, Narendra Modi took on the Congress-led UPA government over policy paralysis and economic slowdown and had promised to lead India on the path of growth and development if his party was voted to power.

Thus, for Union Finance Minister Arun Jaitley, the challenges on the economic front are humongous. He has often said that he inherited the 'economy in shambles' from the UPA government. Given some of the above parameters, one can grant him that benefit of doubt. But the past is done with and now is the time to look ahead.

2015 – Make or break a year
It will not be an underestimation to say that 2015 will be a make or break year for the NDA government and in turn the Finance Minister. So, to start with, if PM Modi's 'Make in India' initiative has to kick-off and in turn generate jobs, the Finance Minister will have to regain the confidence of investors. Modi has often said to foreign investors that India offered them 3Ds - democracy, demography and demand – which will not be found anywhere else in the world. Jaitley will have to address the aspirations of around 65 per cent of India's population which is below 35 years of age.

According to International Labour Organisation's report published in 2014, unemployment rate in India has been showing an increasing trend since 2011 when it was 3.5%. The same rose to 3.6% in 2012 and climbed to 3.7% in 2013. As per another data, about 12 to 15 million new people enter the workforce every year in the country.

Good news
Yes, the economy registered a higher growth in the first half of the current financial year at 5.5 per cent as compared to last year's 4.9 per cent in the first half, and 4.7 per cent in 2013-14, but that is clearly not enough. And yes, the government did undertake the long-awaited structural reform oriented measure by introducing a bill to amend the constitution to implement the Goods and Services Tax (GST). And, in keeping its promise to uplift the economy, the government also raised the FDI limits in defence and Railways. At the same time, stepping ahead with the reform agenda, the Cabinet recently brought Ordinances on the land and coal reforms along with hike in FDI limit in insurance sector. But it needs to do more.

India has been grabbing global attention once again with PM Modi hard-selling the 'India story' from US to Australia to Japan. The other good news is that inflation is going down, allowing the RBI, in a surprise move, to cut repo rate from 8% to 7.75% on January 16 (a key rate that banks benchmark their lending and deposits against), paving the way for a little lower EMIs on housing, auto and personal loans. Plus, India's factory output has grown at a five month high of 3.8 per cent in November 2014 from a 4.2 per cent contraction in October, which signals an industrial turnaround. At the same time, what should also boost morale is the fact that according to the World Bank, India is set to become the fastest-growing big economy in the world in the fourth year of Modi's government, edging past China. Its publication, Global Economic Prospects, said recently that the country would register 7% rise in GDP in 2017 compared with 6.9% for China.

Robust growth forecast
Chief Economic Advisor Arvind Subramanian is also hopeful that the economy is poised for 6 – 6.5 per cent expansion in the next financial year. Meanwhile, all eyes will be on the Budget that Jaitley is due to present in February, which will be the first full one of the present government and wherein a slew of big-bang reform announcements and tax-relief for the common man is expected. Moreover, in the recent Vibrant Gujarat Summit the Finance Minister promised a stable tax regime, easy land acquisition and implementation of GST within a year, among other things. Thus, 2015 is the year when he and his men will have to keep the promises made to bring India's economy back on track and present a growth-oriented Budget.

Can India become a $20 trillion economy from a $2 trillion one that it is today, as envisaged by PM Modi? Also, can Minister Jaitley make 2015 'India's year'? For the sake of the multitude of India's population that live in abject poverty and millions who do not have jobs and thousands who struggle to make ends meet, one hopes so.

By: Manisha Singh