While economies of several prominent nations in the world are experiencing turbulence and volatility, the Indian economy seems to be holding up well and appears to be one of the few countries that still pursues growth as an ambition. One can reel off statistics about India's economic success, which seems exceptional in comparison to the BRICS countries, each of which is having differing levels of struggle to survive and stay afloat. In general, economists globally have been quick to write off the growth stories of emerging economies.
India can boast the lowest Inflation and cur-rent account deficit, with the highest foreign exchange reserves in recent memory and a relatively stable currency, coupled with the highest GDP growth amongst large economies. Although, much of this is being credited to the free fall in oil prices of which India has been one of the big-gest benefactors and, despite broad-level indices being positive, the real story is far from encouraging. If one were to dig deeper, it is evident that the structural issues that haunt the Indian economy are far too deep and wide with the chasm built over the past several decades.
Fast-tracking India's growth remains the key challenge for finance minister Arun Jaitley. It is against this background that he presented his third budget - a moderation in the face of challenges of growing tax and non-tax revenues, to meet with demand of expenditure, severely impacted by compelling and much-needed welfare expenditure, overwhelming commitment of pay-outs as per the recommendations of the VIIth Pay Commission and the implementtion of the defences' One Rank One Pension (OROP) plan.
From the objective of reviving economic growth, the top priorities for budgetary allocation remain the ailing infrastructure; a banking sector that is weighed down by NPAS; an agricultural sector that is deprived of infra-structure for irrigation; and the much-needed financial sector reforms. No one would disagree that money spent in these areas would be a catalyst for growth that would benefit India's billion plus population. On the other hand, although well-intentioned and delivered on promise, the fiscal deficit (e) 3.5 per cent, one wishes could have been bigger, to accommodate resource allocation for key growth initiatives.
Apart from budgetary allocations to these critical areas, the big change-makers could be the initiatives that would uproot ground-level challenges (which is what most complain about), such as the use of technology in governance as an enabler to business. Also, hugely important is the restoration of confidence in the minds of foreign investors, who continue to perceive India as a highly tax-litigative society. Any amount of promise for a stable and predictable tax regime, coupled with a non-adversarial tax regime, would not go down well unless the government and the bureaucracy both speak the same language. Unfortunately, this lack in uniformity of approach continues to derail confidence-building measures time and again - Vodafone's tax case just, does not cease to be news.
Going forward, the most important challenge any FM is to have avenues to raise revenue without overloading the system with taxes - an option that seems to have reached a level of saturation. To this end, increasing the tax base could be the most potent revenue earner, given that the penetration of tax payers in our country remains abysmally low, when compared to developed economies. As recommended by the Tax Administrative Reform Committee (TARC), use of sophisticated technology could unravel significant information about the demographics of future taxpayers and lead to achieving the desired objective of increasing the population of taxpayers.
The government also has the largest asset base and strategy to monetise the value of such assets that can unlock value and bring back the much needed revenue. Hard decisions to exit loss making PSUs are a must and the government would need to go into overdrive in its disinvestment programme, which has remained more talk than action till now.
For the economy to grow and for the kind of investment required, India just does not have its own resources to finance growth. Therefore, the return of FD1 in a major way, which has been eluding us till now, could make a big difference. For that to happen, all the wheels must move together - allocation of resources for key growth drivers, confidence building policy initiatives and core strategy to increase revenue base, to name a few. As Indians, we all live hoping to see better days and also to fulfill a promise to deliver to ourselves what each of us truly deserve.