Union Budget 2013-14 would be the most austere Budget unveiled in the recent history given Finance Minister P Chidambaram’s promise to slash this year’s fiscal deficit to 5.3 per cent of the gross domestic product (GDP), and the next year’s to 4.8 per cent. The challenge is to restore the aam aadmi’s confidence in the economy over the episodic spike in prices of primary articles. The government should place more emphasis on economics rather than politics if it wishes to control inflation. Corruption and the Congress’ complicit silence over a battery of scams are the other bugbears of the ruling government. Chidambaram needs to electrify the capital markets and enthuse investors. Some measures, such as rolling back the Alternate Minimum Tax, need to be adopted. The payment of the advance tax by small and medium enterprises should be made flexible with the option to pay taxes during the following quarter, in order to avoid penalties and high interest rates. Regulatory supervision on microfinance institutions should be imposed, putting a cap on interest rates. On the other hand, incentivise foreign investors to pour dollars into India, which would strengthen the rupee, thereby allowing import prices to lower, and hence, tame inflation. Also, introducing direct cash transfers would minimise errors of exclusion and inclusion. Food security is another issue, and a populist Bill that will expand the supply of cheap food grains for the poor is likely to be implemented this year. Let’s wait and watch whether the finance minister will listen to the outcry of the common man or not. Hope and hype are two best friends in the Budget theory.
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