In the face of an economic slowdown, everyone agrees that bitter medicine is the need of the hour. There is only one glitch no one wants the medicine administered to themselves.
At the same time, Mr Modi is in the business of winning elections, and there is a host of them just round the corner. He and his team will thus tread with caution, looking to balance populism and fiscal prudence, although the space for the former is limited (so is the appetite for the latter, whatever one might say in public).
Mr Arun Jaitelys maiden Budget should start by restating the gas-filled numbers in Mr Chidambarams last Budget and bringing government accounts back down to the earth. A complete and correct picture of the state of public finances would also give the government some space to implement much needed reforms. These reforms would be more difficult if it continues to live in the virtual reality that the last few Budgets have created.
The major step that Mr Jaitley should propose is a repeal of the horrific retroactive amendment to tax laws in the 2012 Budget. That one act of policy activism alone has perhaps caused incalculable damage to the country than years of policy paralysis combined and needs to be urgently undone.
The Doing Business 2014 report ranked India at 186 among 189 countries in enforcing contracts. Sanctity of contract is one of the foundations for a market economy. Poor disposal rates and ill-developed arbitration mechanism are responsible for this state of affairs. The Budget would do great and lasting service to the nation if it emphasizes judicial reforms. The disposal rate and virtually unrestrained appeals have choked the system, and more than 3 crore cases are pending in courts. This has implications not only for business, but for civil rights as well. It is estimated that almost 2.5 lakh people - 65 percent of those in prisons are under-trials. This reflects very poorly on us as a modern republic.
A review of all cases where the government is a litigator and closure of frivolous cases would go a long way in clearing the mess clogging the judiciary. Working with the judiciary to fill vacancies, a more rigorous process for appeals and fixing a minimum three-year tenure for the CJI would be other steps that would help, but some of these would be beyond the purview of the Budget.
Other major steps that are expected from the Budget include some movement on infrastructure projects, push to skill development initiatives, the ritual reference to GST and possibly some tax slab changes to reward the BJPs middle class constituency. However, the government has had barely a month to plan the Budget and it would be more realistic to expect an incremental improvement rather than a revolutionary one.
By Anand Agarwal, PGP Class of 2015, Indian School of Business
NOTE: The views expressed are those of the author