NO GAINS BY REPEATING TARGETS THAT ARE NOT CREDIBLE

There have been mixed reactions to the Union budget presented by Finance Minister Nirmala Sitharaman on February 1. Economic experts, market analysts and the people have all spoken about both hits and misses.

- ABHINAV SINGH

While the budget gave a boost to the infrastructure and the agrarian sectors, and gave due attention to the technology sector and startups, little was done to boost the real estate segment and the bleeding automotive sector. Reforms around income tax aim to improve the spending capacity of individuals in order to boost consumption.

Eminent economist and former deputy chairman of the Planning Commission Montek Singh Ahluwalia said that the budget is a “business-as-usual budget”. In an exclusive interview, he told THE WEEK that the budget does not present a clear strategy to address constraints that are hampering the growth of the economy. Excerpts:

Does the budget come up to your expectations? Will it help to achieve the government’s aim of making India a $5 trillion economy?

It is essentially a business-as-usual budget and not one which is designed to address the serious challenges facing the economy. Growth has collapsed, and this in turn is reflected in the very poor employment performance. The important point is that the slowdown is not just a cyclical phenomenon from which a rebound can be expected with a business-as-usual budget. Growth in the current year is likely to end below 5 per cent. A purely cyclical reversal could bring growth back to 6 per cent although it will take longer to achieve this than this budget projects. However, we grew at an average of 8 per cent in the first seven years of the UPA government. The fall from 8 per cent to 6 per cent reflects structural constraints. The budget does not present a clear strategy to address these constraints. The collapse of private investment and the poor performance of exports are the major problems. I do not think the budget offers any credible solution to these problems. Reducing the corporate rate of tax moves us to a better tax structure, but reviving confidence among domestic private investors requires a much larger effort that is missing.