Budget poses many challenges for Government

The Government has a serious challenge in the Budget as it has to balance the three objectives of maintaining the growth momentum, fiscal discipline and continuing with the inclusive growth strategy. This is difficult but can be done through a judicious approach.

The fiscal deficit is high and needs to be reduced but this has to be done in a calibrated and careful manner. Reducing the fiscal deficit through rollback of the fiscal stimulus would, however, have an adverse impact on the manufacturing sector and overall economic growth.

The government should seriously consider ways and means towards better expenditure management. This is possible through the use of biometric card system and better monitoring to keep a check on the subsidy bill by reducing the administrative expenses and preventing leakages.

More aggressive divestment will also be a way of garnering additional revenue. Accelerating the pace of investment is imperative, particularly in sectors like infrastructure and the need to reduce corporate tax rates and minimum alternate tax (MAT) — in particular, reducing the MAT rate to 50 per

cent of the effective corporate tax rate. Reform in dividend distribution tax to reduce the cascading effect is also necessary.

The Budget provides a good opportunity to draw up a road map for holistic reforms in the agricultural sector covering the entire supply chain from ‘ farm to fork’. This is the key to debottleneck the supply side constraints in this sector so as to avoid future food inflation.

The private sector can contribute in a host of activities and the government should be ready to provide enabling conditions, including fiscal incentives wherever it is required. Human capital and skill development are critical for India’s development and job creation and the corporate sector has to be encouraged to play its due role.

It is important that necessary preparations are made towards uniformity in central value- added tax (CENVAT) and service tax so that implementation of the goods and services tax ( GST) becomes easy. Reduction of central sales tax (CST) from two per cent to one per cent is an aspect that needs serious consideration.

In some cases, reform measures have not been matched by speedy implementation or a transparent set of rules and procedures. Speedy implementation and transparent procedures are critical for effective and efficient governance.