Budget 2016- The Many Worries Of Mr. Jaitley

And what he can do to solve them in the Budget... 

- Prosenjit Datta

For any finance minister, preparing a Budget is all about trade-offs. It has to meet many different objectives simultaneously, and some of them might be in conflict with one another. In an ideal world, Finance Minister Arun Jaitley would have presented a Budget that would boost economic growth,raise lots of revenues in a benign tax environment, give incentives to corporations to invest more, while spending lots of money for the welfare and social well-being of all citizens, particularly the weaker sections, and also have enough money left for crucial functions of the state such as policing, defense, etc. And, all this, without running up a fiscal deficit.

Unfortunately, no finance minister ever gets to operate in an ideal world. As he prepares his third Union Budget, Jaitley, too, faces a host of domestic economic challenges, at a time when the global economy is looking decidedly volatile. At home, in particular, Jaitley’s headaches are growing by the day. Economic growth has not picked up as much as was expected. At the beginning of the year, the North Block team had projected a real GDP growth of 8.1-8.5 per cent for the current fiscal, accelerating to 9 per cent-plus in 2016/17. When Chief Economic Advisor Arvind Subramanian released the Mid Term Review of the Indian Economy in December 2015, the expectations had slumped. The review cautiously talked of real GDP growth for the current year at 7-7.5 per cent. The caution is warranted – in the September quarter, Indian GDP grew by 7.4 per cent, which was lower than the 8.4 per cent growth clocked in the corresponding quarter of last year.