With the coming Union Budget being the last before the country goes to polls in 2019, Finance Minister Arun Jaitley has his task cut out. He needs to strike a delicate balance between the imperatives of election-related populism and tough reforms. The most challenging task is to find ways to address agricultural distress, unemployment and downturn in private investments. Though the Economic Survey, tabled in Parliament, projected the GDP growth rate to be in the range of 7% to 7.5% in 2018-19, it also flagged risks from rising oil prices and growing protectionist tendencies in some countries. The salaried middle class is also pinning its hopes on the Budget to provide some tax relief. During recent interviews with a few news channels, Prime Minister Narendra Modi had indicated that the Budget may not contain freebies and sops. Among the many challenges facing the government is the decline of farm gross domestic product (GDP) growth to 2.1% for the current financial year, compared with 4.9% in the previous year. The sector is reeling under deep crisis due to non-remunerative prices and growing debt burden. With nearly half of the labour force being dependent on agriculture and allied sectors, it is essential for the government to focus on irrigation, seeds and crop insurance to nurse the farm sector back to health. Two back-to-back disruptive measures — demonetisation and Goods and Services Tax — have dragged the economic growth and impacted several sectors. Declining farm incomes and lack of jobs are the two key issues over which the NDA government has been facing flak from the opposition.
The Budget proposals will be keenly watched as creating new jobs and boosting growth are the two priority areas for the government. During the 2014 election campaign, the BJP had promised to create 10 million jobs but has been way off the mark. The latest International Labour Organisation (ILO) data shows the number of jobless is expected to increase to 18.6 million in 2018, against 18.3 million in 2017. Since a major chunk of employment is provided by the informal sector, the Budget must give priority for stepping up investments in infrastructure projects and encourage private players to speed up job generation. Domestic private investment holds the key to trigger both growth and jobs. Corporate India is looking for easier tax regime, lower interest rates and simplification of regulations. Already, the government has lowered the growth rate forecast for the year ending March, 2018, to 6.75%. Against the backdrop of weak economic growth, Jaitley faces a difficult task of balancing growth without compromising on fiscal prudence. India can grow faster if the government executes the committed programmes rather than opting for a large dose of fiscal expansion.