Fingers crossed on reviving growth

The maiden budget of the BJP led NDA will be crucial to determine whether the country could come out of the slump and regain eminence at the international stage. From the coveted club of BRICS, India had been downgraded to the group of Fragile Five.

The election of the pro-market Narendra Modi has raised hopes that reforms will be put on the fast track and projects which were struck will be cleared.

This has led foreign investors to invest over Rs 1 lakh crore till date in equity and debt, taking the stock markets to new highs. What has also been helpful in part is the crisis in Russia and concerns about growth in China. Money which would have poured into these countries is coming to India, believing that Modi government will turn around the economy.

With such high hopes from the new government by the investors, both foreign and domestic — and the corporates, any slip off in budget will be punished. “We want the budget to be hard hitting and a strong budget,” said CII director general Chandrajit Banerjee. He said that the budget should be growth oriented. “The budget should make the investment come back into the country and lead to a pick up in demand,” said Mr Banerjee. The government should carry forward the reform agenda, especially in taxation, he said, “Retrospective taxation must be taken off and GAAR should be postponed. Fiscal deficit need to be addressed properly.  There is a need for hard decisions on subsidy be it food, fuel and fertilisers,” said Mr Banerjee.

IT industry veteran T.V. Mohandas Pai said the budget needs to be straight forward and honest. “The budget should not inflate revenues and inflate the plan budget.

The interim budget presented by the UPA government was criticised for “managing the accounts” where money for subsidy was postponed for next fiscal.

“If due to honest accounting the fiscal deficit rises, let it be,” said Mr Pai.  He said that there is a need to increase the non-tax revenues. “PSUs are sitting on a huge pile of cash, around Rs 2 lakh crore. They should be asked to give more dividends to the government,” said Mr Pai. He suggested that the subsidies need to be cut and number of free subsidised LPG cylinders given in a year be cut to 9 from 12 now.

He said that no tax cuts should be announced this year. “The public should be asked to wait for one more year. If they give relief in personal income tax, inflation will rise. Government needs to tighten the belt and cut expenditure.”

Prime Minister Narendra Modi has already told the public to be prepared for the “bitter pill.” Finance minister Arun Jaitley has also talked about short-term fiscal discipline. There has already been a steep hike in railway fares. There is a talk in the government corridors that in the first-two years the government will go for strict measures and in the last three years will go for populist measures after getting the economy back on track.

“This is going to be a tricky budget as expectations from both corporates and citizens are high while the government will need to triangulate between inflation, budget deficit and investment,” said Gaurav Gupta, senior director, Deloitte India.