Economic Reforms in India: BJP Government Keen on Taking Tough Calls
Times are certainly not very rosy for a government that finds itself in the vortex of concerns and expectations. The anticipation of a miraculous resurgence of economy brings people on the edges of their seat every time they sense optimism in what BJP government says. Although the general mood has turned sour after government decided to increase rail fare by 14.2% for the passengers, Finance Minister defended it prudently by saying, “It’s a difficult but correct decision.” That clearly echoed what our new PM had vowed few weeks back – taking tough steps to ensure that our economy somersaults back to good health.
Although there is a lingering fear that tough measures might make the new government unpopular, yet it’s not holding back. Rail fare hike, as analysts are saying, has been on Modi’s to-do list for quite some time now. So, what else can we expect from the man who has promised performance, even at the expense of making a dent in his image?
With the union budget likely to be tabled on July 11, the focus would surely be on increasing the limits for tax deduction under Section 80C. The idea has been mooted to encourage savings among the taxpayers. Moreover, there’s a possibility of government strongly pushing for the restoration of tax incentive under the Income Tax Act, to give impetus to the export sector. The provision was annulled during the 2011-12 financial year.
The new government is also keen on revamping the Food Security Bill to ensure that the benefits under the scheme reach only the poor. In fact, BJP was quick to include this issue in its election manifesto. BJP’s call for ‘universal food security’ is against the existing Food Security Act that covers only 75 percent of rural and 50 percent of urban population.
There’s a strong likelihood that Modi will finally venture into tricky waters. Yes, you got it right – I am talking about fuel subsidy reforms. Instead of doing anything drastic, the government intends to gradually increase prices of diesel, LPG and kerosene. While this may bring down the subsidy burden, it will increase the transportation cost and throw food price out of gear. There, Mr. Modi and his team have to tread cautiously.
One of the initiatives high on Modi’s agenda is the strengthening of public sector banks by merging the weaker banks with the stronger ones. It’s needless to say that some banks have more non-performing assets than they could afford. To pull them out of this misery, Modi government might put its effort towards consolidating the banking system.
It won’t be long before BJP will shift its focus on amending the Land Acquisition bill, which was proposed by the UPA. As it stands now, the provisions of the Bill seem to defeat its purpose – making land acquisition process “more transparent and farmer-friendly.” Neither economists nor industrialists hold high opinions about the Bill as the private companies will get tangled in lengthier bureaucratic processes.
If BJP is not afraid of ruining its popularity scorecard with tough calls, it’s equally valiant in its decision to reform Labour laws. Going by the speculations, Modi is likely to take the unconventional road. Instead of getting into the difficulties of amending the laws, he would encourage states to ease off their laws and make them flexible. Presently, the labour regulations are creating a deterrent for “expansion of industrial employment” as companies find it hard to get permission for terminating employees or closing down their establishments.
That time is approaching near when Modi’s skill as a decision-maker and a visionary leader will be tested.
Union Budget 2014-15
What is GST: How will it change India
GST Bill Nears Consensus
Sensex, Rupee Vs Dollar, and Gold Rate – Do they reflect our economic outlook?
Is India Heading Towards Another Economic Crisis?
Positive signs for Indian economy – what does it mean?
Important facts about Indian Economy
Rupee Free Fall: Cause and Consequence
Why is the Indian Rupee Depreciating?
Investment Risks to Economy – Caution Is the Watchword for RBI
A Parallel Economy of Bribe
FDI Norms for NRIs Relaxed – Foreign Investments Anticipated
Will India be affected by the Crisis in Greece?
Effects of Poor Monsoon on the Indian Economy and various sectors
How Inward Remittances impact the Indian Economy
Monsoons and the Indian economy