Today is the eve of the release of the Indian Budget, and naturally, many people are suffering from Budget Blues (i.e., fear of the unknown).
Indian Finance Minister P. Chidambaram will be balancing on a tightrope when he rises to present his budget. The country's options are insufficient, and there are too many challenges. In addition, the UPA government has not been acquitted of wrongdoing on economic and political fronts. Given the plethora of scams and controversies and the mismanagement of various important issues, this government's ability to ensure good governance seems to be the most daunting challenge of all.
My worst fears
I have been waiting for the Budget's release with some trepidation, particularly with regard to the Direct Tax Code. The government did consider the proposal for expatriate taxation last year, and it was expected to have a far-reaching impact, particularly on NRIs in the Gulf. However, the government chose to defer judgement, flagging it for review by an expert committee instead. One does not know much about the outcome of this effort since it has received little attention from the media. If it is accepted and introduced, then the outcome will be akin to taking a step backward.
With industrial production expected to touch 3.1 per cent and GDP growth expected to drop below 5 per cent, the options for finding resources to bridge the deficit are insufficient. In my opinion, the government should boost investments, and dependence on foreign direct investment and other forms of remittance to the country should be reduced. Take bold steps to cut subsidies, no matter how difficult it may be. Try planned disinvestment, without any politics. Rationalise defence spending (definitely not an easy task).
Serious funding is necessary to meet the target of $1 trillion for the management of the country's infrastructure. Where is the country going to find these funds? It's a very tricky issue! Raising tax rates to augment revenues will only make matters worse. What is needed, therefore, is a revolutionary method of raising money, without burdening the aam aadmi (the common man).
This is an election year. Naturally, the UPA will be compelled to introduce several populist measures, with a focus on vote-bank politics. My sincere hope is that the finance minister will avoid such temptations.
Where do we go from here? Transparency and good governance, to a large extent, will restore the confidence of the people. Hence, it remains to be seen whether the government will comply. Wait and watch the Indian finance minister in action in live broadcasts on Indian channels at 11 a.m. (India time).
P Chandrasekhr is the Group General Manager of Jawad Sultan Group of Companies. The opinion expressed in this column are his own and does not represent those of the organisation that he represents.