India Budget 2014-15 Analysis
Published on 19 Oct, 2015
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When the Finance Minister Mr. Arun Jaitley assumed office earlier this year, he had his task cut out for him. The country was slowly descending towards the “Hindu rate of growth” (~3.5%) over the past two years. Fiscal numbers were amiss, indecisiveness and red tape had affected government operations, supply side bottlenecks were creating stagflationary conditions, and business sentiment was in doldrums. Yet, the first budget from the Finance Minister seems to be a concrete step to rekindle growth through fiscal consolidation, investment cycle revival, driving the manufacturing sector, supporting agriculture and restoring business sentiment.
To begin with, the fiscal deficit for the year has been pegged at 4.1% of GDP in 2014–15; this would be reduced further to 3% by 2016–17. Despite the steep target and sluggish macroeconomic conditions, the Finance Minister has decided to dig his heels in and work on this admittedly hard task. Though he has not outlined how he would go about achieving these targets, the Finance Minister has stated that tax buoyancy (rather than curbing essential expenditure) would be the way forward. The establishment of the Expenditure Management Commission and the introduction of the Goods and Service Tax could be the first steps.
Jaitley’s Budget did not forget the “aam aadmi” who voted on its feet and gave an overwhelming majority to the government. As a sign of thanks there were a number of benefits in the form of tax concessions (rise in tax exemption, easier norms for student loans, allocations for low-cost housing and rise in investment limits).
The NDA government has projected this budget as the first step in returning the country to 7–8% growth. Given the short time frame, numerous problems at hand and limited fiscal bandwidth, the Finance Minister unveiled a pragmatic budget which takes into account ground realities and suggests some quick fixes. It would be too early to pronounce judgment on this budget and the government would face its real test in 2015-16, when the honourable Finance Minister rises to present his second budget.