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Budget 2019: Just Do It!

Can one expect the FM to be bold and reforms-oriented in her maiden Budget? Accelerating the growth of the economy and creating employment are arguably the two biggest concerns.

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One may be perceived as alarmist, but expectations are that Union Finance Minister Nirmala Sitharaman unleashes reforms in her maiden Budget that match the 1991 opening up of the economy

True, the crisis may not have reached the 1991 proportions, but there are tell-tale signs. Joblessness is at a 45 year high; there is widespread rural distress; investments are declining; and yes even there are claims of bloated growth figures. India is definitely staring at a definite slowdown.

Given the circumstances, the Finance Minister must vigorously push public spending, especially on infrastructure. Investment levels need to rise and so do consumption levels. A new industrial policy has already been spoken of. The PM has already stressed how he wishes to see at least 50,000 startups in the next five years.

Can one expect the FM to be bold and reforms-oriented in her maiden Budget? Accelerating the growth of the economy and creating employment are arguably the two biggest concerns.

Farm distress is for all to see, but then agriculture is a state subject.

M Govinda Rao says, with the capacity utilisation in the industrial sector reaching very high levels, much of the growth in the industry has to come from new investments. This requires increasing public investments, and banking reforms need to be made real -- to make them lend more.

As for farmers, the immediate issue facing the farmers is the spectre of drought once again with the projected subnormal monsoon, argues Rao.  The coverage under farm insurance must be expanded quickly. The coverage of the Kisan Credit Card and the borrowing limit requires to be increased. An initiative towards creating cold storage and marketing facilities, model laws relating to contract farming and land consolidation and incentives for agro-processing industries must be put in place.  The model APMC Act must be brought in. In all these, the Government of India will have to work with the States so that the process of implementation is smoothened.

Yoginder Alagh feels the FM must have a credible package of relief and recovery after a bad monsoon from the angle of drinking water and sowing. And then revive investment. The Economic Survey and Budget Speech must, as in the past, reflect thinking on critical issues and not score brownie points. For example the PMEAC (PM’s economic advisory council) has rightly said that Arvind Subrahmanian’s critique of GDP changes us silly, since estimating a relationship between GDP and some variables in the past misses the point that productivity is rising, but more serious critiques, like those of the expert group under Sudipto Mandal and past members of the Statistical Commission, have been ignored.

The unorganised sector, too, needs attention. As Arun Kumar argues, the current slowdown in the economy originated in the unorganised sector which has been declining since demonetisation. It was further hit by GST and then by the NBFC (crisis). Attempt to force digitisation is said to be further damaging it. This has led to the demand shortage which is now also impacting the organised sector. To revive the unorganised sector, a simpler GST may be helpful and credit availability to this sector should be improved. Businesses in this sector are short of working capital and cannot cope with GST even though they are exempt from registration under GST.

The farming sector is a major component of this sector and needs support because the farmers’ incomes have been affected adversely. All this has impacted employment generation adversely. So, investment in employment generating sectors like, education, health and rural infrastructure, needs to be greatly stepped up. These need to be the government’s priorities

Meghnad Desai, on the other hand, feels the public needs to be reassured that despite recent lower growth estimates, the economy remains on a sound footing. The downturn may have been caused by uncertainty regarding the election and continuing fragility in credit markets following the IL&FS fiasco.The following pages present a ready reckoner of sorts – of what India and India Inc expect from FM Nirmala Sitharaman. The package also has an exclusive interview with Vedanta’s Anil Agarwal on country’s economic ills.

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