If we
are concerned with the economic well-being of the nation, we have to focus on
economic growth. Setting a target and working on a roadmap to reach it is the
only way to success, and who knows this better than Prime Minister Narendra
Modi.
In 2014, when Modi came to power, he set up a performance matrix, which seemed
far-fetched, but his tireless efforts hit the bull’s eye.
He has caught the bull by the horn on issues such as NPA,
corruption, leakages and cleanliness; and effective solutions like the
insolvency and bankruptcy code (IBC), GST, demonetisation, Jan Dhan accounts
and Swachh Bharat Abhiyan have given confidence to the electorate that nothing
is impossible — “Modi hai to mumkin hai”.
That spirit continues. For many who believe that India
becoming $5 trillion economy by 2024 is a sweet dream; wait, we have the
roadmap. Finance Minister Nirmala Sitharaman has
unleashed it in her maiden budget. The budget is a vision document of the
government. It is a major policy statement. In her budget speech, the FM said
“it took 55 years for our economy to reach $1 trillion… Our economy was at
approximately $1.85 trillion when we formed the government in 2014. Within five
years it has reached $2.7 trillion. Hence, it is well within our capacity to
reach the $5 trillion in the next few years.”
The Economic Survey has
laid down the parameters for achieving this target. It has mentioned that
issues like job creation, savings, consumption, demand, should not be looked at
in silos. The CEA has said that with the current 7 per cent GDP growth rate, if
we accelerate investments and target 8 per cent growth, the $5 trillion economy
is well within sight. Investment is the key; others will follow. We will get
out of the vicious circle of low liquidity, low demand, low investment, low
production and lower growth to the virtuous cycle of investment, savings,
production, consumption, demand and growth.
The government has continued its push for infrastructure
development so that ease of living is continuously upgraded, with a focus on
rural roads, waterways, and low cost housing. The Pradhan Mantri Awas Yojana
alone has set a target of building 1.95 crore houses. The government has also
allowed an additional deduction of Rs 1.5 lakh for interest payment of housing
loans.
A lot has been announced to promote
private higher education under the “Study In India” initiative, and building
world class institutions and also sports universities under Khelo Bharat.
The government has also announced opening up of the sovereign
debt market. Those who doubt the government’s intention can draw comfort from
the fact that this will help the government swap high-cost domestic debt for
cheaper international credit, thereby helping to reduce interest rates.
The banking sector has seen many reforms in last five years.
Further, to help private capital formation, the government has promised Rs
70,000 crore of fresh capital infusion into public sector banks. It will also
set up development financial institutions to support long-gestation projects
and tackle the asset-liability mismatch. To boost consumption and resolve the
NBFC issues, the government has guaranteed 10 per cent of loss on assets pool
purchases to the tune of Rs 1,00,000 crore from NBFCs.
At present, the private sector is largely over-leveraged, and
is under pressure to resolve its debts and is short of capital. For capital
formation, the government has to depend on foreign capital and, therefore, is
continuing with its policy of liberalising FDI, particularly into insurance,
aviation and single brand retail segment.
MSMEs have also has received special allocation by the
government; to support manufacturing, the government has announced streamlining
55 labour laws into four codes and enhancing minimum wages. Small traders with
turnover up to Rs 1.5 crore will get the benefit of a pension scheme.
The government has reduced the corporate tax to 25 per cent
for small enterprises with a turnover up to Rs 400 crore, and has announced
several measures to boost the start-up ecosystem. To continue with the benefits
of this provision, it is expected that it will not be misused by the
beneficiaries as is done at times under capital gains tax, dividend
distribution tax and buy-back of shares.
Modernisation of railways is estimated to require about Rs 50
lakh crore of investment. The government has proposed public private
partnerships and selective route privatisation to augment its resources.
Initiatives like building a national power grid and a warehousing grid will
have far-reaching benefits.
For ease of doing business, tax compliance is crucial. The
government’s plan to implement e-assessment is a big game changer: It will
bring transparency and reduce harassment of tax payers due to subjective human
intervention.
The government’s initiative in resolving pending indirect tax
litigation through Sabka Vishwas Legacy Dispute Resolution Scheme is
commendable. This scheme covers, past disputes and provides relief ranging from
40 to 70 per cent, and also relief on levy of interest and penalties.
With all the constraints on expenditure, the finance minister
has allocated funds across various social segments. The budget has increased
funds allocated to central sponsored schemes by 8.8 per cent to Rs. 3,31,610
crore. The total expenditure of the government has increased by 13.4 per cent
from the revised estimates. The fiscal deficit has been kept under check at 3.3
per cent of GDP. The budget meets the demand for investment and growth without
disturbing the fiscal math.
It is not redistribution but growth
that matters. The prime minister has rightly said that we have to increase the
size of the cake. Economic growth is our target and the focus on empowerment of
the weaker sections of the society though education, healthcare etc is the
solution.
