With Finance Minister Arun Jaitley ready to present his fourth straight budget on February 1, expectations is at an all-time high from all quarters. By the looks of it GST will become a reality in the coming financial year. And continuing with last year’s Budget, a further cut in corporate tax can be expected. An increase in individual tax slabs can also boost spending, to counter the sluggishness following the demonetisation announcement.
While announcements on increase in credit availability in the agricultural sector, budget availability for the defence sector, impetus to infrastructure spending, Government’s continuous focus towards health, education, under-privileged, and social sectors are expected, the time is ripe for following structural strikes that can transform India from a tortoise to a hare.
Incentivising the private sector
Only 1.35 lakh jobs were created in 2015. India, today, is grappling with almost zero employment elasticity. Even in the boom years of 2004-09, when GDP growth averaged around 8 per cent, only 2.7 million jobs were created when over 55 million Indians joined the workforce in the same period. The Government’s skill development initiatives have failed to provide jobs; it is time to give a thrust to job creation. One of the ways is to give incentives to the private sector, especially SMEs, is through tax credits. A similar push met reasonable success in the United States when HIRE Act (popularly known as Jobs Act) was introduced; 10.6 million unemployed workers were hired within the first 8 months of its enactment.
Decentralised execution of ‘Make in India’
The Government launched ‘Make in India’ to raise the share of manufacturing in GDP from 16 per cent to 25 per cent and make India a manufacturing hub. The fallacy that needs to be fixed here is that State machinery needs to be empowered as the most important components required for success, such as labour, land acquisition and local infrastructure, falls under their. A precedent of one such decentralised mechanism exists in the form of ‘Cabinet Committee on Investment (CCI)’ that was announced in the FY 2013-14 Budget. The Project Monitoring Group (PMG) under CCI operated in a decentralised way and its members (including secretary level officers) held meeting with different stakeholders in the concerned States while ensuring that the stalled projects got cleared quickly.
Though there are multiple issues faced by States, each State in India faces bottlenecks at different levels when it comes to ‘ease of doing business’. For Haryana, labour unrest and lack of finance are key bottlenecks but for its neighbouring State, Uttar Pradesh, long power cuts and poor connectivity are the greatest hindrances. Hence, a mechanism needs to be evolved where a rigid and centralised model is not imposed (like the present centrally-sponsored schemes) but State-specific assistance is granted where their machinery has flexibility prioritise the areas of work.
Exploiting and not ‘blackening’ coal
At 300 billion million tonnes, India has one of the largest coal reserves in the world. In the past decade, India has imported coal over 1 lakh crore MT every year! World over, mineral-rich countries have exploited their resources to attain prosperity. Middle-Eastern countries have effectively utilised crude oil in transforming their economies. India should not only look at becoming self-dependent in coal but should also encourage commercial mining and exports at a large scale. Even at 15 per cent growth in domestic coal consumption, the coal reserves would last around 150 years. Cheaper coal would further give impetus to infrastructure creation as coal is the primary raw material for the steel, cement and power industries.
The present Government has shown extraordinary resolve in taking unconventional and bold measures in different facets of policy making and governance. The central Budget is much more than an accounting exercise and these structural strikes in the upcoming Budget can go a long way in transforming the Indian economy for the better.