There are a lot of expectations in India that the coming Budget on July 10, 2014 will somehow tackle all the serious issues in the Indian economy. The serious issues are inflation, stagnation in the economy, the fiscal deficit and the wide gap between exports and imports. These four issues are also related to each other.
If the government is able to contain inflation, that will reduce the fiscal deficit and the Current Account deficit will also be resolved. If the Fiscal deficit and the Current Account Deficit are co mined, this will strengthen the Indian rupee and that in turn will allow our imports to be cheaper and thereby reduce subsidies. If imports become cheaper due to a stronger Rupee, then subsidies will go down and that will reduce the Fiscal deficit.
There is inter-connectivity between what ails the Indian economy. The budget can definitely address the fiscal deficit and inflation. But there is a danger that the Finance Minister may go overboard and listen to the industry and business associations too much. There are definite dangers that the Finance Minister will become over-ambitious and try too much.
The Government has to avoid trying too many things. Hyper -activity in economics might be dangerous. The Budget cannot be a cure-all. The Budget is only a step in a long route.
Good governance, absence of corruption,change in elegal system and diverse other measures are needed for the economy.
But the budget is important. It sets the trend. Let us hope for the best.