Come Feb 28th,all eyes will be on Pranab da(or so he is called.. :-)) and his union budget. It is the most significant event for India and its economy for it states out the directions for our country for the next 1 year.
So what do we expect from it?. Ofcourse different people have different expectations. Upper middle class people like me would want the tax slabs to be raised. Industrialists like Ambani would want some export relaxations. But what about the common man?. His most important worry will be inflation and this is going to be single most important aspect for the finance minister.
We have achieved 8.6 percent GDP growth(whether this is really an end in itself or whether this should be viewed as merely a means for improving the quality of life of poor ..is well, another hot topic) and our economic advisory counsil headed by ex-RBI governer C.Rangarajan predicts 9% growth(pre-recession growth) for the next fiscal. So we are doing well in the growth front.
But there are two major worries for the government - inflation and fiscal deficit. First let us look at the steps which the government can do to control the deficit. To control the latter, the government is expected to do some fiscal tightening. rolling back some of the export cuts (now that the economy is bouncing back) can be one step. Government can achieve huge savings in expenditure if it focuses on the subsidies(kerosene,food) reaching the right person. This will mean the government can afford to cut down on some of the amount which it sets aside for subsidies.Implementation of UID will help in a big way.
To control inflation, it should look at improving agricultural productivity, have better marketing infrastructure for the farmers, eliminate the middle men involved( easier said than done), improve storage capacities etc. Our Prime minister has himself recently said that we cannot under estimate the importance of adopting good marketing techniques in agriculture.This is echoed by many economists. We might be wondering what is wrong with high inflation. what is the big deal about it, monetary tightening is bad for us?. But the problem with india's inflation has high degree of inertia and it will be difficult for government to step in later, if it is not controlled now. This is also the view echoed by the economists at IMF. So let us be prepared for some tighter measures now.
Ofcourse, everyone expects Pranab da to present a populists budgets , or that is what we want. But i feel it will be more on a boring side this time. One one side he has to control inflation and deficit , on the other side he cannot compromise on the economy's growth. Now ,it all depends on how he wields his magic wand - let us wait till 28th to see how!. :-)
So what do we expect from it?. Ofcourse different people have different expectations. Upper middle class people like me would want the tax slabs to be raised. Industrialists like Ambani would want some export relaxations. But what about the common man?. His most important worry will be inflation and this is going to be single most important aspect for the finance minister.
We have achieved 8.6 percent GDP growth(whether this is really an end in itself or whether this should be viewed as merely a means for improving the quality of life of poor ..is well, another hot topic) and our economic advisory counsil headed by ex-RBI governer C.Rangarajan predicts 9% growth(pre-recession growth) for the next fiscal. So we are doing well in the growth front.
But there are two major worries for the government - inflation and fiscal deficit. First let us look at the steps which the government can do to control the deficit. To control the latter, the government is expected to do some fiscal tightening. rolling back some of the export cuts (now that the economy is bouncing back) can be one step. Government can achieve huge savings in expenditure if it focuses on the subsidies(kerosene,food) reaching the right person. This will mean the government can afford to cut down on some of the amount which it sets aside for subsidies.Implementation of UID will help in a big way.
To control inflation, it should look at improving agricultural productivity, have better marketing infrastructure for the farmers, eliminate the middle men involved( easier said than done), improve storage capacities etc. Our Prime minister has himself recently said that we cannot under estimate the importance of adopting good marketing techniques in agriculture.This is echoed by many economists. We might be wondering what is wrong with high inflation. what is the big deal about it, monetary tightening is bad for us?. But the problem with india's inflation has high degree of inertia and it will be difficult for government to step in later, if it is not controlled now. This is also the view echoed by the economists at IMF. So let us be prepared for some tighter measures now.
Ofcourse, everyone expects Pranab da to present a populists budgets , or that is what we want. But i feel it will be more on a boring side this time. One one side he has to control inflation and deficit , on the other side he cannot compromise on the economy's growth. Now ,it all depends on how he wields his magic wand - let us wait till 28th to see how!. :-)
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