As we all knew that Mr. Arun Jaitley, Finance Minister of the newly formed government will present their first maiden budget on July 10, 2014. While talking about the present economy, he has to face multiple challenges while presenting the budget in the parliament. As the BJP promised to the voters before elections, the budget must be growth supportive and should be acceptable by the majority of the people. This might be the test for the government to answer on the question of living on the expectations of the supporters.
His first task as a representative of the policies of the government is,to contain the fiscal deficit for 2014-15 fiscal within 4.1% of GDP. Kelkar Committee outlined the strategic graph of the economy, according to that, fiscal deficit may brought down to 3% of the GDP in the coming financial year 2016-17. Unlike, in the financial year, 2013-14 India’s fiscal deficit was 4.5% of the GDP.
The economists assuming that, Mr Jaitley have an option to bring down the subsidies, which are accounted for 2.2% of the GDP in the year 2013-14, in order to attain the required fiscal consolidation. Moreover, the government has to uphold the Food Security Bill passed by the previous government to maintain the positive image among people, there is little scope for the finance ministry to reduce the subsidy on food items.
Ashok Gulati, ICRIER in an interview stated that, “Currently the public distribution system has a leakage rate of 40%,” said Mr Gulati. “If government wants to implement NFSA (National Food Security Act) through the public distribution system, unfortunately it will drill holes into the budget and not solve the purpose of tackling poverty and hunger”. He also added that, the government can save Rs. 50,000 crore to Rs. 60,000 crore annually by making subsidies more targeted and by plugging the leakages present in the system.
Mr. Gulati’s suggestion to our finance minister is to simplify the subsidy on the fertilizers which cost the government Rs. 68,000 crore in this fiscal. If government straightly distribute to the farmers on per hectre basis then we can again save 20-25% easily from that. This money can be saved and invested in other segments in optimum way for the growth of our country like, in infrastructure development, education, creating employment, armed forces and many other sectors. As expectations are more with the government, people as well as investors are eagerly waiting for budget announcement day.