How can the Budget fix slowdown, rural distress and demand deficit?

The wish lists of the common man, corporates and economists are endless before any Budget. They serve one purpose: reveal what is on the minds of people. But it is one thing to expect, and yet another thing to get.

While expectations may have no limits, what can be given is obviously constrained by resources. Mobilising resources for development is probably the only major constraint faced by the Budget makers.

Various ways, both tax and non-tax, have been used by successive governments in last two decades to enhance resource mobilisation. But requirements have gone up drastically. What the central and state governments are going to borrow this financial year is close to Rs 11 lakh crore, the highest borrowing programme ever. Large government borrowings will limit the resources available for the private sector.

The current scenario is quite different from earlier times. The government has just won a resounding mandate for a second time, is in a position to implement all the reforms thanks to the sheer strength of numbers it commands.

The falling growth rate of the economy is something that needs to be addressed on an urgent basis. It is very clear from the high-frequency numbers that the rate of growth is sagging due to domestic factors, and not due to any external factor. This needs to be taken cognizance of to make correct prescriptions for resolution of these issues.

The distress in the agrarian sector is something that needs to be addressed immediately. Agrarian issues have many dimensions. It has a price angle to it. Quite often when the harvest is good, prices fall. There are instances when the cost of production is higher than what the farmer can get on the produce even if he transports it to the mandis. This is when farmers even destroy their produce. Alternatively, farmers could have kept the produce in storage facilities if such facilities were available. But there is a severe shortage of such facilities in the country.

Transport and storage facilities and availability of cold storage chains for fruits and vegetables are areas we need to pay attention to, not just to ensure fair and lucrative prices for farmers, but also to maintain price stability. Any attempt to address this aspect will be central to organising the economy better.

Closely related to the agrarian distress is the unemployment scenario, which as per data has deteriorated to such an extent that it is now at its highest level in many decades. Thus, it becomes an issue of employment and income. There should be more focus on employment generation, because only solid income growth can help create demand in the economy.

The sluggishness in the auto segment, for example, is due to low demand, rising costs of maintaining cars and slowdown in the financing due to tight liquidity among finance companies. Improving the economy would require a fresh impetus to employment generation and income growth through targeted programmes.

Getting the money for all of this while retaining the fiscal deficit target on the glide path already outlined would be an arduous task. While there may not be any major direct tax concessions, the efficiency of tax system needs to be enhanced in order to raise the tax-to-GDP ratio without hiking rates and without creating any compliance hassles.

We are perennially short of housing, and this is an area where the Budget thrust needs to become more pronounced. India has a growing population and an expanding urban and semi-urban setting. Demand for houses is close to 10 million a year and we are not even close to meeting 10 per cent of it. In this connection, it may be pointed out that water and electricity supply to all homes and provisions for basic sanitation facilities are possible only with housing facilities.

If promoted, housing can be an agent of growth for all allied sectors, which are suppliers to the housing industry. Housing has a social dimension too. In its social orientation, the Budget may be more oriented towards improving the lot of the poor, especially those living below poverty line. Many of the programs of the government in its first term had this explicit orientation and this time should not be an exception.

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