Budget 2014 will be litmus test for Modi Government

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PM Narendra Modi
With 28 sittings and 168 working hours in hand, Prime Minister Narendra Modi's maiden Budget session began today at a time when the Government is facing several challenges like food inflation, weak monsoon due to El Nino weather phenomenon and surge in oil prices due to on-going Iraq crisis. As Opposition is expected to score brawny points by cornering the Government on the issue of price rise, rail fare hike and Tamil Nadu fishermen issue, this budget session will no doubt be a litmus test for the NDA Government-led by Prime Minister Narendra Modi.

The Union budget is likely to focus on putting the faltering economy back on track. The Budget for 2014-15 should aim to fulfill its promises made in its manifesto of providing relief to inflation-hit common man, amid falling growth, stagnating investments, high fiscal deficit and external crisis. There are high hopes from the new Government who is expected to raise tax slabs and also significantly hike the annual tax exemption limit to provide a much-needed relief to salaried class, which is reeling under the stubbornly high inflation.

Will Jaitley bring derailed economy back on track?

Some of the key agenda infront of Finance Minister Arun Jaitley is to focus on curbing high inflation, fiscal deficit, bring tax incentives to build investors confidence, focus on infrastructure, increase tax-to-GDP ratio and put public finances back on track.

Unable to curb high inflation and hoarding was one of the key factor behind last UPA Government's downfall. Hence, expectations are at peak from the Narendra Modi Government as inflation rate is hovering around 8 per cent in May. Containing spiralling prices is among the top priorities, while the Reserve Bank have made it clear that efforts on this front would continue. Onion prices have shot up 40 per cent in the last two weeks to Rs 30 per kg at Lasalgaon, the country's largest wholesale market for the edible bulb, despite the imposition of minimum export price on the vegetable to check its domestic rates from going up. Expectations of poor monsoon has further lead to rise in prices of essential commodities.

Containing spiralling prices among top priorities for the Government

Infrastructure is another important sector in which the Government may look forward to create new investment opportunity to compete with the global market. The Government is likely to introduce infrastructure business trust method to encourage investment with help of public-private partnership to build large pending projects. These trusts will be registered under SEBI and offered range of tax incentives.

Bringing back unaccounted money stashed in foreign bank in one of the top priority. The Narendra Modi Government's efforts to crack down black money abroad will have a significant boost in the Indian economy. The Swiss Government have already extended necessary support to the SIT on black money and is willing to work with NDA Government in power.

The NDA Government should also give a right signal on FDI(foreign direct investment) in retail, Defence, railway and infrastructure sector. Though BJP clearly promised FDI in certain sectors to generate employment but Minister of commerce(independent charge), Nirmala Sitharaman has clearly ruled out FDI in retail sector." The need of the hour for the Government is to bring the nation back on the growth track to attract investments. Finance Secretary Arvind Mayaram recently said that the country should prefer FDI route over FII for economic growth. "I believe our potential growth Rate is 8 per cent. And to get their, we need to develop resources. And that which cannot generate domestically must come from outside and if it comes from outside then we prefer it in the form of foreign direct investment(FDI) rather than foreign institutional investment(FII)," Mayaram said.

While 1,000 crore more money was allocated to Nirbhaya Fund in the interim budget under UPA, little was done by the Government for the safety of women in the country. All eyes will be on the Narendra Modi Government who has constantly mocked Congress for not using a single penny from the Nirbhaya Fund allocated for the safety and security of women. The budget 2014 should definitely have some plan to implement if Funds are allocated for women.

Agriculture sector and Farmer's suicide is another priority which needs to be addressed in the Budget 2014. Blaming the El-Nino, scientists and Met Department have already warned of a possible drought due to weak monsoon. 

Is the Government ready with bitter medicine?

The Narendra Modi Government who faces its first test in Parliament have already hinted of bitter medicine needed to bring the floundering economy back on track. But will the Modi Government be able to fulfill its promises made in the manifesto of curbing inflation. Rail fare hike of 14% was one such bitter medicine ahead of the Railway Budget to be announced on July 8.

There are also high hopes from the new Government that it will raise tax slabs and also significantly hike the annual tax exemption limit to provide a much-needed relief to salaried class, which is reeling under the stubbornly high inflation. For boosting investment, Jaitley is expected to announce tax incentives for industry.

Health care and medical infrastructure is also in the cards in the Budget 2014. Also Narendra Modi Government is likely to bring a number of drugs under price control ambit which will plunge their prices by 10 to 15%. Price rise will be the focus of this Budget with Government already under pressure over food inflation.

The new Government will be focusing more on building investor's confidence which was lost under UPA due to rampant corruption and wrong developmental policies. In order to encourage Research and Development, certain tax incentives are also needed.

Opposition corners Government over price rise

The Opposition have cornered the Government demanding immediate discussions in both Houses on the issue of rise in prices of essential commodities. "Instead of 'acche din', 'mehenge din' have come. We want a discussion on it in Rajya Sabha" said BSP chief Mayawati demanding discussion in the Parliament. The Government is yet to bring Acche din as it may take at least few months to bring the economy back on track.

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