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HindustanTimes Thu,27 Nov 2014

Build-up to budget

Road ahead appears full of twists and turns for Prime Minister Modi
Gaurav Choudhury, Hindustan Times
New Delhi, May 26, 2014
First Published: 21:33 IST(26/5/2014)
Last Updated: 16:59 IST(24/6/2014)

Narendra Modi was sworn in as 15th Prime Minister of India on Monday, taking charge of the world's largest democracy as it struggles with an economic slowdown and a severe shortage of jobs for its booming young population. 

Now, the Modi-led NDA government will have to negotiate through a maze of thorny issues and the road ahead appears full of twists and turns.

Read: Narendra Modi sworn in as 15th Prime Minister, calls for 'strong and inclusive India'

HT connects the dots on the challenges and dilemmas:

Newly-appointed Prime Minister Narendra Modi at his swearing-in ceremony at the Rashtrapati Bhawan in New Delhi (HT Photo/Ajay Aggarwal)


# Budget gaps

Challenge: Policy uncertainties loom ahead of the budget, which can upset plans to rein in the fiscal deficit

Dilemma: Roll-back of tax cuts given in Interim Budget will raise revenues, but push up prices


#Rupee swings

Challenge: The rupee's rebound can be short-lived as money can flow out quickly if policy paralysis persists

Dilemma: Lifting curbs on gold imports can trigger dollar outflow, hurting the rupee's value


#High prices

Challenge: Rising prices hit family budgets hard. The same amount of money now buys fewer goods. Clothing, medical care, education, eating out and most services have turned dearer

Dilemma: There is not much the government can do as weather-induced supply disruptions can push up prices of food products further


#Joblessness

Challenge: About 12 million people join the queue of young hopefuls every year. Finding jobs from them is a key challenge

Dilemma: Job creation follows real investment with a time lag. Speeding up projects on highways and ports will need early approvals


#Costly borrowing

Challenge: High inflation has prompted RBI to raise interest rates. In the last three years, EMIs have steadily gone up.

Dilemma: Inflation has shown sign of rising further; the RBI may be prompted to hike lending cost even more to curtail demand


#Industrial deceleration

Challenge: Higher prices and need to find additional money for EMIs force cuts on purchases of televisions and cars

Dilemma: With limited room to give tax breaks, govt has to decide on whether to continue with the excise duty cut on cars after June


#Inclusive growth

Challenge: Innovative schemes and policy decisions are required to reach out to the poor and cater to rising rural aspirations

Dilemma: Overhauling existing policy would not be prudent and the fiscal scope for raising the budget for current schemes is limited


#Policy standstill

Challenge: There have been no major policy decisions in recent months because policy-makers cannot agree on critical issues. Parliamentary logjam has hurt governance

Dilemma: The policy gridlock has dampened investor sentiment. Other emerging nations are competing with India to attract FDI


#Weak spending

Challenge: Raising peoples' spending ability on goods is critical to push demand and investment

Dilemma: In a year of flat income, it becomes difficult to raise spending without tax breaks


#Slow growth

Challenge: From being an engine of global growth India is now struggling to claw out of a decade low growth

Dilemma: Weak revenues may force the government to borrow more to fund welfare schemes


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