No flashy dismantling of woodwork but a gradual hard dribble to the net was how finance minister Arun Jaitley chose to get India’s slowing economy finds its goal of higher growth and more jobs. He chose fiscal prudence over grand schemes delivering a strong message in his much-awaited maiden budget.
Jaitley’s budget clearly brings out the fact that India’s economy needs an overhaul after sputtering over haywire prices, low investment and a precarious fiscal situation.
The finance minister reiterated the government’s commitment to walk the talk on fiscal discipline pledging to keep the fiscal deficit at 4.1% of GDP.
There were also bold reformist intent in abundance in his speech. He promised to ease foreign investment caps in the defence and insurance sector, which have been hobbled by lack of capital.
He laid out a roadmap for reforming India’s subsidy regime to make it more efficient, and sounded confident that India will be able to roll out its most ambitious tax reform-- a nation-wide goods and services tax.
The Bharatiya Janata Party’s (BJP’s) ’s) 3D view— demography, democracy, and demand—is d—is an encapsulation of India’s current problems. The solutions, however, are far more complex than a catchy alliteration. Demand—for goods and services—is vices— is a function of money and income.
Greater income will prompt people to spend more as they climb up the income me and social ladder. One of the surest ways to revive an economy is give more in the hands of people and nudge them to spend more.
This will ensure that goods disappear ear from shop shelves faster than before. Companies, thus, will be encouraged to add more capacity lines and hire more to feed into the growing demand, leading to a revival of the so o called 'manufacturing' sector.
There is, however, a qualification in n this line of argument. A large plant the employs very few but produces in n a massive scale, cannot necessarily to lead to greater income. China-style e mega industrial zones are important to reap benefits of scale, technology and temper down prices.
But for India, any plan to convert the he country into a manufacturing hub would ould necessarily have to factor in the millions ions of hopefuls who join the work force every year. This cannot happen unless there is specific pecific focus on small and medium firms.
So, Jaitley much-awaited budget made ade small factories central to the plan absorbing sorbing job aspirants, removing them from unproductive farm work, skilling them and their eir future generations, adequately for them to graduate to the bigger corporations.
Only such enterprises, however small mall these may be, located in rural areas, can fulfill a cycle of rising aspirations and growing income.
It is for the government to create the right conditions for small industry-led manufacturing revival and to enable skills, money and meet people’s legitimate ambitions to achieve relative financial and social status.
Acche din, it was obvious, will come from good economics.
(Graphic: Mukesh Sharma, Sanjay Tambe, Illustration: Siddhant Jumde)