As a banking professional, what are your broad expectations from this year’s Union Budget?
In the upcoming budget, revival and sustenance of the economy will be the key factors. For example, investment and inflation will be the focus areas – initiating measures for achieving fiscal consolidation, reviving investment and consumption demand, and promoting exports in order for the GDP to grow and the rating of the country to improve.
How will the global economic scenario influence the policy makers with regards to this year’s Union Budget?
The uncertain global macro-economic environment and the dynamics around are widening the Current Account Deficit (CAD), which is at a high level. This is resulting in numerous challenges for the economy, whose growth momentum has been low for some time now. This has been impacting all sectors in the form of high interest rates, escalating inflation and prolonged global economic uncertainty. The investment demand is picking up, but its sustainability remains uncertain. Inflation is high, owing to various structural and cyclical factors. High fiscal deficit too is one of the catalysts for perpetuating inflationary pressures in the economy, directly and indirectly.
The Union Budget 2013-14 could be a powerful tool to bring the Indian economy back on the track of 8-9% growth. India enjoys the advantage of vast domestic demand, and has the potential to not only arrest further decline in growth, but also to actually reverse the trend sharply upward, if the reforms momentum is sustained in the upcoming budget and beyond. I also think that with proper initiatives, the overall demand - investment and consumer - can be strengthened.
What steps must be taken to protect the sentiments of Indian investors?
The government should tweak the taxation policy including rent allowance, capital gain scheme, rebate for senior citizens, leave travel assistance, gift tax, goods and service tax and financial exemption limits. Policies should be designed in such a way that better utilization of cash reserves in PSUs can be made towards infrastructure investment.
The budget should also focus on revival of exports. CAD as a percentage of Gross Domestic Product (GDP) has witnessed a secular rise in recent years. One of the key factors behind this is the continued deceleration in export growth, while imports have not declined at the same pace, due to high oil and gold imports. India's huge CAD is prolonging the weakness in the rupee against the US dollar. The government has implemented several measures for state-specific targets, but much more needs to be done across various sectors of the society.
What are the other major issues that should be addressed in the upcoming budget?
Education and skill development are two major areas that need to be addressed. A quarter of the country's population is still illiterate, and the little progress made in these directions is slow. This needs to be accelerated.
Healthcare is another area that is yet to develop fully and become more favourable. The upcoming budget should focus on this sector, too. Today, 70% of Indians shell out money from their pockets to meet healthcare expenses. Based on demand it is prudent that the government assists in making this favourable to Indian citizens.