By Ravi Kant
Edited by Namitha Sadanand, Associate Editor, The Indian Economist
Union Budget 2014-15
1. Introduction –
The NDA Government has finally initiated the agenda for ‘achhe din’ (good days) for the long run by presenting an optimistic Union Budget for the financial year 2014-15. At present, our economy is enveloped with many problems and obstacles. Inflation, lower GDP, increasing CAD, growing inequality, poor performance by the infrastructure sector and its related sectors have created sluggishness in the economy. Most economists, bankers and journalists have blamed ‘policy paralysis’ by the UPA Government for this sluggish growth. However, the ‘Silver lining Union budget 2014-15’ has spread an optimistic investment climate in the Indian economy, whose growth was stagnant for the past three financial years. This budget is the epitome of revolutionizing the business ecosystem of India.
2. Discussion on Union Budget 2014-15-
The Union Budget is estimated to be INR 17.94 Lakh Crore which is 13.9 % of GDP (Source: Centre for Budget Governance and Accountability). There was a wave of sanguinity in the Market when Mr. Jaitley declared that the Goods and Services Tax (GST) will be rolled out by the next financial year. The GST is the need of the hour because the Economic Survey 2013-14 has clearly mentioned that it will bring a revolution in indirect tax reforms by improving the competitiveness of production and export from India. Another major reform is the introduction of 49 percent FDI in both the defence and insurance sectors. This is a great move initiated by the FM as India does require FDI in these sectors for its growth and development. FDI has always been the source of creating new job opportunities in India. Transparent tax policies and the lowering of tax disputes will create more room for investment in the economy. The increase in tax exemption from INR 2 Lakhs to INR 2 .5 Lakhs has provided a great relief to tax payers.
Financial Inclusion is the need of the hour because 60 percent of the population in India does not have bank accounts (Source: moneycontrol.com). Therefore, the Budget has proposed the opening of ‘Payment banks’ that will open accounts and facilitate deposits and remittances. Moreover, a payment bank license for India Post would help in boosting financial inclusion by facilitating banking in remote corners of India- where India Post has a deeper penetration than the country’s largest bank, the State Bank of India. Savings is also very important for an economy to grow; since an increasing number of people in India invest in gold, this has resulted in huge imports of this metal, further resulting in increase in the CAD (Current Account Deficit). Hence, the introduction of NSC (National Savings Certificate) with insurance cover and ‘Kisan Vikas Patra’ is a major milestone to boost saving. Further, a single Demat account is now enough to get access to all the financial instruments in the country which would allow greater participation of people in the financial markets. It will allow investors to track all their investments through a single window.
Fiscal deficit was the talk of the town due to the disappointing performance of the economy combined with high inflation, to which Mr. Jaitley has clearly mentioned that the fiscal deficit would be targeted at 4.1 percent for 2014-15 and will be 3 percent by 2016-17. A lower fiscal deficit will allow the RBI to reduce policy rates in due course of time. To revive the education sector and build a quality labor force, the Government’s initiative to build AIIMS, IITs and IIMs is commendable and significant.
Globally, women control about $20 trillion in annual consumer spending and they are an important force to initiate recovery in the economy and generate prosperity (Source: Harvard Business Review (HBR), September 2009, The Female Economy by Michael.J.Silverstein and Kate Sayre). Hence it is very important for our country to make women feel safe and deliver a congenial atmosphere in society for their progress, without any fear and skepticism. The budget has brought a new scheme called “beti bachao, beti padhao” and will focus on campaigns to sensitize people to women’s issues. Moreover, the ‘Nirbhaya’ fund introduced in the Union Budget 2013-14 worth INR 1000 Crores, was largely unutilized. Hence the FM has announcedthree programmes pertaining to women’s safety under the Nirbhaya Fund,which is a great move. However, according to the Centre for Budget Governance and Accountability, New Delhi, a number of commitments in the election manifesto pertaining to women are not addressed in the budget. But I believe that the NDA Government would be able to cover all of those in the due course of time, as Mr. Jaitley himself has said, “It is not the end, but the start of the Journey”.
3. Conclusion –
Mr. Jaitley’s budget has received diverse opinions from eminent people like Gita Gopinath (first Indian Woman Economics Professor, Harvard University) who says that growth optimism heavily relies on fiscal consolidation and Atsi Sheth (Senior VP, Sovereign Risk Group, Moody’s) who strongly believes that clarification regarding tax issues may help drive investment into the economy. A few people like Mamata didi, Anand Sharma and Bibek Debroy were very skeptical about achieving the goals and numbers mentioned. The Budget clearly symbolizes the ‘Gujarat Model of Development’ of Mr. Narendra Modi- it focuses more on growth than redistribution, by bringing policies which are investment friendly and allowing households to save more. On the whole, this is a budget that has created a lot of optimism in the market and is bound to revive the investment climate in the economy; this will initiate more job creation in the economy and with the required layers of proper monitoring, will spur on the advent of ‘acche din’. A beginning has been made-this budget shows that the seed for good days has been sowed.
Ravi Kant has pursued Economics Honors from Ramjas College, University of Delhi. He loves watching Art Cinemas of bollywood and research in the area of Economics, English Literature, Strategy and history. He wants to be an eminent Consultant in the area of Economics and Strategy. Presently he is doing his MBA in Finance from Institute of Management Technology (IMT), Hyderabad.