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Indian Budget 2014: A Step towards Minimum Government and Maximum Governance-View from Nepal

Paper No. 5757                                       Dated 31-Jul-2014

Guest Column by Hari Bansh Jha

While presenting his budget for the year 2014-15 in the Lok Sabha on July 10, 2014, the Indian Finance Minister Arun Jaitley gave a major thrust for increasing production, improving business environment, encouraging foreign investment, giving boost to the manufacturing sector, developing infrastructure, cutting government debt, streamlining subsidies, generating employment opportunities and bringing macro-economic stability in the country with a view to catching up higher rate of sustainable economic growth.  All this was in line with Indian Prime Minister Narendra Modi's vision to transform the present-day India into a vibrant and modern economic power.

In order to achieve the above goal, all possible efforts have been made in the budget to ensure transparency and establish non-discriminatory regulatory regime with a view to wooing both the domestic and foreign investors. For this, provision of retrospective taxes was done away with. Foreign Direct Investment (FDI) was promoted in all such important sectors, which could boost up the Indian economy.

Realizing the importance of investment in defense sector, Finance Minister Jaitley in this budget speech accorded high priority on the investment and production of domestic manufacturing of arms. India happens to the world's largest buyer of defense equipment, despite the fact that there is huge potentiality for its indigenous production. As a corrective measure, the share of foreign ownership in the defense sector was stepped up significantly from the 26 per cent to 49 per cent with full Indian management and control. Such a step might not only enable this country to reduce its dependence on other sources in defense sector, but it might also help it to emerge as one of the major centres of arms supplier in the world. The country might also save huge chunk of foreign currency and thereby generate employment opportunities on a massive scale through the domestic production of arms. Until recently, foreign investment in the defense sector was a taboo.

Equal importance was given by the Finance Minister for investment in the industrial sector. Towards this end, several important changes were introduced to strengthen the hands of the private sector. Thrust was given for the revival of Special Economic Zones to attract funds from the foreign investors for the development of infrastructure and also to utilize the available unauthorized land effectively. The Indian Custom Single Window Project was proposed to facilitate trade. A National Industrial Corridor Authority was envisaged with its headquarters in Pune with a view to coordinating the development of industrial corridors with smart cities for which US$ 16.7 million has been proposed.

As the development and modernization of infrastructure has remained the top priority of Modi government, a modified Real Estate Investment Trusts type structure was announced for the infrastructure projects. Besides, the public-private partnership (PPP) approach was revitalized so that more of funds to could be generated for in infrastructure sector and other construction activities. Enormous chunk of money was earmarked for the development of highways. Construction work on several airports was envisaged under PPP model. Most importantly, in the river sector a huge Jal Marg Vikas project was proposed for connecting Allahabad to Haldia covering 1620 km distance between the two places.

Construction of a bullet train in the Mumbai-Ahmadabad sector was accorded highest priority. Besides, metro rails were proposed in Ahmadabad and Lucknow. For the development of northeastern region of India, further rail connectivity was proposed. FDI in the railway sector was raised up to 100 per cent, which earlier was banned. As if this was not enough, the government also adopted private and foreign direct investment and public private partnership model to meet the resource crunch. Also, the government in the pre-budget exercise announced the increment of 14.2 per cent on fares and 6.5 per cent on freight rates.

Given the importance of agricultural sector in the national economy, the Finance Minister not only proposed for the establishment of agricultural and horticultural universities, but also for the development of river linking projects. Irrigation projects were given major boost up. Kishan Television are to be established to provide due information to the farmers on farming and several other agricultural activities. 

In the energy sector, construction of 15,000 km pipeline gas scheme was given due thrust under PPP scheme. Priority was accorded to the development of Ultra Mega Solar Power Project in Rajasthan, Gujarat, Tamil Nadu, Laddakh and Jammu & Kashmir for which $8.35 million has been earmarked. Besides, plan has also been made to promote solar power driven agricultural pump scheme at the cost of $ 66.8 million.

Given the fact that the tourism has a tremendous scope in India, the Finance Minister introduced Electronic Travel Authorization (e-Visa) system to give boost to this sector. Initially, this facility would be made available in a phased manner at nine airports of India. In science and technology sector, five additional IITs along with another new five IIMS would be set up.

In order to boost up the moral of the Indian soldiers, a national war memorial, along with a war museum, was proposed, which would be built close to the India Gate in New Delhi with a view to honour the soldiers who laid down their lives for the nation ever since India's independence in 1947. Though late, due honour was also given to Vallabhbhai Patel, the founding father of modern India, through the provision made in the budget to erect the his statue at the cost of $33 million.

Of course, the success of a budget does not lie in figures, but in its implementation. The economic growth of India which averaged around 8 per cent annually after the liberalization effort made by Narsimha Rao government in early 1990s reduced below 5 per cent in the recent years. This was the worst economic performance in India in a quarter century. In the emerging situation, the budget has offered hope that the rate of economic growth of the country would again bounce back to 7-8 per cent in the next three years. Also, given the fact that the present government led by Narendra Modi in India is determined to take the Indian economy to a new height, it can safely be concluded that there is a greater possibility that it would bring solution to many of the inherent problems that the economy has been facing over the years.  

 (Jha is Professor of Economics and Executive Director of Centre for Economic and Technical Studies in Nepal.)