The first Union Budget of the newly inducted government brings about mixed reactions. The ruling party had made big promises before the elections that had actually won over the business man and the common man alike. But the proof of the pudding is yet to be had. We have to wait and watch to see if those promises will be fulfilled. Also the Rail Budget announced just days earlier, appears to suggest that much remains at stake.
It is a fact that the economy is faltering under high inflation and we have witnessed the worst slowdown since free-market reforms of the 1990s. This budget is going to be critical for verifying publicized reforms that brought the current government to power. The combination of infrastructure spending and relaxation of foreign investment curbs is a welcome maneuver and is just what the earlier government wanted to do in previous budgets.
The government did not slash food and fuel subsidies in its inaugural budget, which it continues to criticize, but itself has been unable to do anything about. This only authenticates that it has always been a pragmatic need, till date. According to economist Abhirup Sarkar foreign direct investment (FDI) cannot be a replacement for domestic entrepreneurship and FDI has not brought economic development in any country in the world. Although, higher FDI limits are encouraging, but surely that requires overhauling infrastructure and regulatory framework too.
Even proponents of free market feel that the emphasis on FDI in this budget does raise some concerns. Further, this budget is also carrying on with populist measures that BJP itself was so against, earlier. And now in principle it continues with sops like providing loans to farmers at low interest, finance to landless, budget for madarsas, etc. Some developmental initiatives seem to benefit only few particular regions. We expected the government budget would be more equitably based for the needs of all. Surely it could have been infrastructure and investment focused as well. On the need for reduction of current account deficit it will be necessary to provide more incentives to exporters and this is not seen reflected in the budget.
The budget could have been more inclusive which only goes to show a certain hypocrisy in continuing with populist measures. The Finance Minister stated that we cannot spend beyond our means. He is aiming for sustained growth of 7-8 percent in the next 3-4 years and bound to usher in policies for higher growth, lower inflation. While all of us are aware of the highlights of the budgets – Sardar Patel statue, saving girl child, funding for startups and entrepreneurship, cheaper phones, monitors and tablets etc, yet the government has not been able to find any plan to tackle inflation. The budget 2014 in essence remains a slew of measures for starters.