Last year, it was veteran Deepak Parkeh who criticized the government. This year, several veterans and experts are expressing concern and one of them is Mr. Ratan Tata. Recently, he said that, only promises are not enough for the development but there must be appropriate ground actions to transform the promises into reality. RBI governor has also put the ball in Government’s court by saying that the Government has to take actions for more reforms and RBI will follow the suit.
This Government is still having dream run as far as crude oil prices are concerned, which are at bottom level in last six years. Crude oil prices are down by almost 70% in international market and no signs of recovery in short term. This slump in oil prices is saving billions of dollars for Indian economy.
Source: http://www.investing.com/
Recently, GDP data was published, which is projecting that Indian economy will grow by 7.3% on full year basis. It is rightly mentioned as bright spot in world economy. One can understand the relative importance of this number when US economy expected to grow around 3% or European economies around 2% or less.
When we see lot of positivity about Indian economy then why these veterans are playing different tunes? Why the ground reality is different? Why there is perception that achche din are still elusive? Government and especially Finance Minister has tough job to do in this budget .They have to take some substantial and proactive measures before perception of fading achche din becomes reality. Government has to address following challenges:
One of the indicators of achche din for common person is reasonable or affordable prices of commodities. When Government deregulated the petrol price, it was always northbound in proportion to oil prices when they were rising. Now, when oil prices are declining then petrol price is not going down proportionately. Energy is daily requirement and so petrol/diesel prices are always sensitive issue for the Indians. It has more significance as international market prices are near bottom. Though oil prices are dropped by 70% petrol prices are down around 17%. Obviously, Government hasn’t passed benefit to consumers. Government has to make it clear in budget that how they are deploying those savings and when common Indian will get its benefit.
Falling Exports: Continuously for last 13 months, exports are falling down which is matter of concern for sustainable growth of the economy. Some of the decline is due to oil prices but overall our exports are not growing as expected.
Source: http://www.tradingeconomics.com
Make in India program: This flagship program is envisioned with the best goals and can act as growth engine for the economy. It is supposed to create and improve the business friendly environment in India. The progress of this program is still not picked up as expected. The ranking of India in ease of doing business is improved marginally to 130th rank, showing how long the way is. It would be interesting to see how Finance Minister will gear up and put this program on fast track. One of the noted industrialists, Rajan Bharti Mittal recently said that Make in India program is overplayed, due to which expectations are very high and skewed on success of this program.
Unemployment: Employment opportunity which will provide reasonable living means for willing workforce is another indicator of achche din. As Make in India is still waiting for gearing up, the unemployment issue is becoming critical. India, as per one estimate, adds around 10- 15 million people to workforce. To provide the employment and engaging youth workforce in productive work is really uphill task for the finance minister.
Social welfare schemes: India is social welfare state; Government can’t neglect this core objective. MNREGA was one of the flagship programs of previous regime which was not only social scheme but it was employment guarantee scheme with productive work. According to data, Government is reducing spending on MNREGA which can be reflected that person hours are reduced from 230 Crores in 2012-13 to 166 crores person hours in 2014-15
As many states in India are under severe drought, reducing the government support to such scheme would worsen the problem. It is massive employment generation scheme which has uplifted the rural wages. Government can’t afford to close social welfare schemes till Make in India program flies high. There are many loopholes in execution of the program which have to be plugged in.
Agriculture: The agriculture and allied sector provided around 50% of employment whereas its contribution to economy is around 17%. Increasing number of farmers’ suicides is very serious concern and shows structural default in policies for the sector and insensitivity towards human life. India needs second green revolution to meet increased demand of food grain and better policies for farmers’ good life.
This is 2nd full-fledged budget of current Government and hopes are running high. Government faces challenge of soothing many contradictory objectives. It has to promote capitalism but can’t ignore social objectives. It has to stimulate growth while checking inflation. It has to promote industries without harming agriculture. It has to promote competitiveness without compromising quality and hurting labor interest. It just can’t be few sops here and there but has to be real TRANSFORMING budget.