Published : Friday, 18 July, 2014 10:51 AM
Union Budget gives the direction to which way our economy will drive in next fiscal year. Let’s analyze Union Budget 2014-15: Pro People or Pro Reform?
Union budget for 2014-15 was presented by Indian Finance Minister (FM) in the parliament on July 10, 2014. The budget received different reviews by the different sections of the society. While the opposition Congress, as expected, called budget as ‘directionless’ and ‘unfeasible’, the left parties criticized the budget for being pro-corporate sector.
On the contrary, in a FICCI sponsored poll, most CEOs of the country voted budget as ‘pro-growth’. Rating agency Moody's also called Budget 2014-15 supportive of faster economic growth, but absence of detailed implementation plan makes it modestly credit positive for India.
Most important announcement for which the salaried class eagerly awaits during the budget is tax exemption limit. Budget 2014-15 increased that limit from INR2.0 Lacs to INR2.5 lacs leaving more cash with the public to give an impetus to demand. Though many wanted the government to raise the exemption limit to INR3.0 lacs, government increased the limit by only 50k fearing that excess liquidity in the hands of public will give push to inflationary forces. Thus, stuck between inflation and slow growth, government chose the middle path.
Because of its pro-development plank during its election speeches, some major infrastructure projects were expected to be announced during the budget. Some major initiatives include development of smart cities, port development, metro train projects in Lucknow and Ahmadabad etc. Infrastructure in the country is in shambles and any measure for its development is a welcome step.
Number of million plus cities (cities with population of more than one million) in India increased to 54 in 2011 including 20 cities with the population of more than 2 million. Though urbanization is considered as positive attribute of development process but in India, urbanization refers to merely migration of rural population to urban areas, not planned urbanization full of amenities. In such a scenario, initiative of development of smart cities, metro project can prove boon to the urban areas.
In education sector, government announced several new IITs and IIMs across India. Setting up premier institutes which could provide a quality professional education will without any element of doubt assist in long term development. Move to start IIMs in backward state like Bihar and Odisha and AIIMS in Purvanchal and Vidarbha deserves appreciation. But along the establishment, there quality must also be ensured because lack of quality education will malign the brand image of premier institute of India.
Growth and development of any country will always remain a pipedream if continuous energy supply cannot be ensured. Not just energy, but dependence on clean and affordable energy is required for sustainable development. For that matter, government announced solar power development projects in Tamil Nadu, Rajasthan, Maharashtra and Laddakh.
During the last few years, high fiscal and current account deficit has caused enough harm to the economy, severely affected by the scourge of high inflation, slow growth, falling investment, rising unemployment, falling exchange rate, etc. In order to bring the economy back on track, it is imminent to correct the fundamentals of the economy. Fiscal deficit is important fundamental of the economy and it must not be higher than 3 percent in case of India.
Budget 2014-15 targeted the fiscal deficit to 4.1 percent in current fiscal. Moreover, no cut in non-essential subsidies was announced to achieve that target. More bold steps were expected from the current government which won the election with a rare absolute majority.
Food Corporation of India (FCI), a central government body responsible for maintaining the adequate food stock in the country and its distribution to the poor is plagued with inefficiency. Modi government announces FCI reform. If delivered as announced, it will not just reduce the waste of food grains, but will also improve the supply of food and reduce the food inflation.
Though Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) was announced with a very noble intention of providing guaranteed employment, but gradually scheme got crippled with corruption. Moreover, scheme also created artificial scarcity of labour during agriculture season due to which food prices were also increased. In order to correct the flaw, government decided to bring agriculture also under MNREGA.
From the latest budget, it seems than government tried to introduce reforms without being seen as anti-people. It introduced FDI in defense and insurance but abstained from FDI retail. If NDA government wants to usher the high growth stage of development, it should not shied of introducing vigorous reforms.