While a powerful horse needs to be reined in, one lacking strength requires to be prodded on to win the race. It is the same in the case of the national economy. While in relative terms, the Indian economy can be stated to be doing well, from the point of view of people’s aspirations there is still quite some way to go. As has become clear from Finance Minister Nirmala Sitharaman’s latest union budget, a carefully calibrated approach has been adopted keeping in mind the need to keep inflation in check while at the same time ensuring the growth rate is maintained, even enhanced. Most economists have appreciated that the effort to keep the national debt at targeted levels has been largely effective.
One of the major limitations faced by the Union Government has been the failure to introduce necessary reforms in various sectors, without which rapid transformation is not possible. Vested interest groups, such as farmers in certain states, or state governments that are more focused on protecting small gains rather than looking at the larger picture, have ensured that many of the NDA Government’s objectives have not been achieved. This has reduced the scope of action for the Union Government.
However, the Finance Minister did find ways to keep the economy energised, such as the reduction in Income Tax for the middle class – the much taken for granted section of society. A new Income Tax Act is in the offing and there is much curiosity about what it will entail. And, as usual, the Modi Government has the knack – better than others – to merge political objectives with the required changes. Hence it is that Bihar has received a major boost in terms of projects in various sectors – not only were these much needed but will also please NDA ally Nitish Kumar. It is not that due weightage has not been given to the requirements of others, but the Indian economy cannot benefit unless the eastern states get on par with the others.
The Finance Minister could have had a freer hand if she had more in the kitty, but certain sectors of the economy are not performing up to par, hampering India’s competitiveness. In the context of the anticipated global crisis that will result from US President Trump’s disruptive approach, India should be better placed to adapt, even take advantage. This will be the FM’s next major challenge and India must rise above petty politics to deal with it.
