Arun Jaitley Journey: Sticks to his 3 goals, boost growth, cut inflation, fix fisc

Jul 11 2014, 07:57 IST
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Finance Minister Arun Jaitley presented maiden Budget of the Modi government in Parliament. (Source: Express Photo) Finance Minister Arun Jaitley presented maiden Budget of the Modi government in Parliament. (Source: Express Photo)
SummaryHe will also hope his performance makes RBI Governor Raghuram Rajan cut rates.

for a host of manufacturing sector companies.

For encouraging housing investment, he hiked by Rs 50,000 the cap on tax exemption for self- occupied houses and offered a sweetener of a similar amount as income tax threshold limit. The BSE Sensex swung intra-day by 609 points or 2.4 per cent to close almost flat at 25,372.

Among the things Jaitley surprisingly skipped was a date for the rollout of GST and a plan to cut subsidies. On GST, in a post-Budget interview he said, “Once I establish my credibility with the states, which I hope to do during the course of the year, I will then bring the Constitutional amendment and the concerned legislation”.

On subsidies, he announced the setting up of an Expenditure Management Commission to suggest a reform plan.

Because of the financial straitjacket, the minister’s more than two-hour speech was littered with token allocations for a host of institutes from AIIMS, IIMs and IITs to agriculture universities and cultural institutions. He made large spending announcements for only two sectors — the roads programme with Rs 37,880 crore and Save Ganga with a cumulative investment of Rs 8,000 crore including waterways.

Pointing to the limited fiscal space, Jaitley later said, “I prepared my Budget in just 45 days, with a 4.1 per cent target for fiscal deficit that was already announced and therefore, it’s prudent economic planning not to create uncertainty and go with the target.”

But global rating agencies remained cautious on their India outlook. Standard & Poor’s welcomed steps for fiscal consolidation but said, “The Budget has no immediate impact on the sovereign credit rating on India (unsolicited rating BBB/Negative/A-3).”

Fitch was more critical: “We are surprised that the Budget has stuck with the outgoing government’s fiscal consolidation path. The agency is currently unsure how this can be met without further revenue-strengthening or expenditure-saving measures.”

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