New Delhi: For the new finance minister, who is most likely to be Arun Jaitley, reviving the growth and bringing down the sticky high inflation; especially when there is a risk of a sub-par monsoon, would be the immediate priority.
After rating agencies threatened to downgrade India to junk status, former finance minister P. Chidambaram cut down on spending and postponed some of the subsidies to the current financial year to bring down the fiscal deficit to 4.6 per cent.
Mr Jailtey’s challenge will be to see that fiscal deficit remains within target while arranging for huge subsidy left behind by the UPA II. The new finance minister will need to curb the subsidy, especially in diesel where partial de-regulation was allowed by the UPA.
Any slippage in fiscal deficit will spark negative reaction from the rating agencies and markets.
In this context, the Budget which is expected to be presented in July will be the first major challenge for the new finance minister.
The Budget will need to rekindle the animal spirit in the business community, lift investors co-nfidence and kick start the investment cycle to boost the growth.
India’s economy is in shatters after growing sub-five per cent for straight two years.
While general sentiment in the economy has been improving, Mr Jailtey will need to keep up the momentum and lift the economy. For this, the government will need to improve the ease of doing business and remove the regulatory hurdles which have been hampering setting up new projects. The government will need to resolve iron ore and coal mining issues.
In the long term, finance minister will have to bring states on board to push the ambitious goods and services tax (GST). It will help to stabilise revenues, while potentially improving the country’s growth prospects, by promoting inter-state transactions, and general efficiency of the economy.
