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Come
February and the cynosure of all eyes is the Indian
finance ministry. The forthcoming Union Budget is likely
to be unique in many aspects. As the fear of a global
slowdown is in the news, the first budget of the new
millennium poses lots of challenges to the Finance Minister.
On the macroeconomic front numerous events occurred
in conjunction. Along with the weaker monsoons and exceptional
rise in crude oil prices, capital flows dwindled remarkably.
This led to a larger outflow of foreign currency reserves.
A sharp fall in the rupee took place. The slowing down
of the manufacturing sector in particular, phasing out
of quantitative restrictions and the snail's pace of
PSU disinvestments - convey the warning of a domestic
slowdown. The coming budget has to take intensive care
of these sensitive issues and protect the economy from
going sloth.
At
this backdrop, the agenda before the Finance Minister
for the Union Budget hardly changes: containing the
burgeoning fiscal deficit, accelerating the disinvestment
process, reducing infrastructural bottlenecks, creating
an environment conducive to FDI and FII inflows, restoring
investors' confidence and finally hastening the economic
growth process. The non-productive part of government
expenditure needs to be slashed, with efficient market-oriented
allocation of resources. Keeping inflation under control,
the budget should encourage investment and stimulate
demand for goods and services. Removing quantitative
restrictions (QR) is not enough for the economy. The
budget has to devise schemes to improve the export capabilities
of the small and medium enterprises, thereby protecting
them from any ill effect of the removal of QRs.
The
budget needs to undergo a genetic transformation. Gone
are the days when the highlights of any budget would
be an odd tinkering with direct and indirect taxes.
Gone are the days when economic inaction could be camouflaged
under the garb of populist measures. Gone are the days
when people would appreciate narrow benefits without
regard to broader ramifications to the economy. The
Union Budget is basically going to be a clarion call
for action; action on the political, economic, administrative
and social front. Easier said than done, but the time
to make a start has come. |
