Task cut out: 10 challenges for FM ahead of BJP's maiden budget

  • Gaurav Choudhury, Hindustan Times, New Delhi
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  • Updated: Jul 10, 2014 12:01 IST
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Finance minister Arun Jaitley will have to negotiate through a maze of thorny issues and the road ahead appears full of twists and turns. HT presents 10 challenges that the FM faces ahead of his maiden budget on Thursday, July 10:

* BUDGET GAPS
4.1%

Of GDP, the estimated fiscal deficit for 2014-15 set in the Interim Budget presented in February

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

Dilemma: Tax hikes will raise revenues, but push up prices

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* HIGH PRICES

6.01%

India's Wholesale food inflation in May, the highest in five months

Challenge: Rising prices have 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: Clampdown on hoarders of staples such as onions and potatoes is a good first-step, but there is not much the government can do as weather-induced supply disruptions can push up prices of food products further.

* JOBLESSNESS
12 million

The number of additional young people who join the workforce every year

Challenge: Millions of 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 to early approvals

http://www.hindustantimes.com/Images/popup/2014/7/05_07_pg15a.jpg

* COSTLY BORROWING
8%

The repo rate, the rate which banks borrow from RBI

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

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* INDUSTRIAL DECELERATION
-0.1%

India's manufacturing sector contraction in 2013-14, the worst since 1991

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, government has to decide on new ways of incentivise industry

* INCLUSIVE GROWTH
Rs 34,000 crore

The amount earmarked for rural job guarantee scheme MGNREGA for 2014-15 in the Interim Budget

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 require time to implement and the fiscal scope for raising the budget for current schemes is limited

Analysis: Budget 2014: Before the achhe din, here comes the big squeeze

* POLICY INCONSISTENCY
Rs 20,000 crore

The retrospective tax demand that British telecom giant Vodafone is facing in India

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 investor sentiment. Other emerging nations are competing with India to attract FDI

* WEAK SPENDING
57.1%

Of GDP, India's households had spent in 2013-14, same as last year

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

Analysis: The time is now: 'impossible' possible this budget

* SLOW GROWTH
4.6%

India's average GDP growth in the last two years, the first time in 25 years it has grown at sub-5% in two successive years

Challenge: From 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, hurting the fiscal deficit

Price conundrum
4 reasons why taming inflation is turning out to be more difficult than thought:

* Costly fuel
Solution: Cut excise duty on petrol and diesel to bring down pump-gate prices of the transport fuels

Risks: It will erode government's revenues and put further strain on the fiscal deficit in a slowdown year

Read: States should take action against hoarders to rein in prices: Jaitley

* Expensive veggies
Solution: Crack down on hoarders has already been announced; ban export of onions; canalise imports of through state-run agencies like Nafed

Risks: Export ban could hurt onion farmers' incomes; lack of warehouses means bulk imports of veggies could rot before they reach consumers
 
* Costly cereals
Solution: BJP's manifesto talks of trifurcating FCI into three separate agencies for procurement and supplies; initiate steps now on these lines

Risks: Movement of foodgrains from surplus to deficit areas could be stunted by already overflowing silos
 
* Expensive consumer goods
Solution: Extend the excise tax cut on cars and consumer goods beyond the stipulated June 30
 
Risks: Extending the tax cuts will upset the government's budget and plans to contain the fiscal deficit within 4.1% of GDP in 2014-15

Full coverage: Countdown to Union Budget 2014

 

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