A lot is riding on the Narendra Modi-led government’s first budget — likely to be presented in the first week of July — to help the economy claw out of crippling slowdown as also on how it plans to deliver on some of its electoral promises including jobs and price control.
Quick decision making and speedier implementation are vital to overhaul India’s collapsing infrastructure, which, if built, could catalyse every sector, from farm to factory, create jobs and multiply income.
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“First on the to-do list, as widely expected, is to get project clearance and implementation expedited,” Deutsche Bank India chief economist Taimur Baig said in a research report.
“Reducing regulatory uncertainty and simplifying procedures for obtaining clearances would be a priority. It would also help boost investor confidence appreciably, if the government can set up a single window clearance facility for investment related to infrastructure projects,” Baig said.
Roopa Kudva, CEO and managing director of credit rating and research firm Crisil said: “The lowest hanging fruits are fast-tracking of projects in pipeline. This will pave the way for better returns on investment, create jobs, lift income growth and spur private consumption demand.”
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All eyes will also be on how the new finance minister balances the budget books, without hurting India’s vast consuming class, and also with limited legroom to splurge on populist welfare measures.
In the interim budget, presented in February, then finance minister P Chidambaram had slashed indirect taxes on a slew of consumer goods and cars, which aimed at making them cheaper, while helping manufacturers.
These tax cuts, however, were only for a limited period—till June 30, 2014—presenting the new government with a delicate dilemma: to raise the taxes back to their original levels and risk fanning inflation or continue with the lower taxes and risk lower earnings.
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Global credit rating agencies, which have spared no punches in criticising the policy standstill during the UPA government’s latter period, will be keenly watching the pace at which the new government lifts the policy freeze.
The spectre of a failed monsoon rain because of a probable El Nino — a weather glitch in the Pacific Ocean that affects weather patterns - looms large over the economy, which could make push up food prices in the coming months affecting budget estimates.