Thursday, 22 May 2014

Top 5 Expectations from Narendra Modi Government

Posted by Siva Kumar Ari
Top 5 Expectations from Narendra Modi government. A lot is riding on the Narendra Modi-led government’s first budget likely to be presented in the first week of July, to help the economy law out of crippling slowdown as also on how it plans to deliver on some of its electoral promises including jobs and price control. Quick decision making and implementation are vital to overhaul India’s collapsing infrastructure, which, if built, could catalyse every sector, from farm to factory, create jobs and multiply income. Narendra Modi Government facing a crucial time to satisfy the requirements of people.

Top 5 Expectations on Narendra Modi:

Direct and indirect tax reforms:


All eyes will also be on how the new finance minister balances the budget books, without hurting India’s vast consuming class, and also with limited legroom to splurge on populist welfare measures.

In the interim budget, presented in February, then finance minister P Chidambaram had slashed indirect taxes on a slew of consumer goods and cars, which aimed at making them cheaper, while helping manufacturers.

In the past four years, the share of indirect tax in the central government’s total tax kitty rose from 39.2 per cent in FY10 to 46.9 per cent in FY13. And, there has been a corresponding fall in the contribution from direct taxes. India’s GDP growth during the period declined from 8.6 per cent in FY10 to five per cent last financial year, according to Reserve Bank of India data.

Modi had said the tax system needs to be reformed as it has become a burden for the common man. The BJP has been studying a proposal to replace the tax system with a uniform banking transaction tax.

Removing Investment Bottlenecks:

Arun Shourie said that Narendra Modi First forte is implementation and he will focus on the bottlenecks. For instance, instead of iron ore or bauxite exports, we should have value addition in India and we should address what is holding that up. Secondly, is very keen that doing business should be easy. So, all procedures will be simplified.

Liberalisation of FDI/ FII Inflows: 

"The need to incentivize greater flow of Foreign Direct Investments into the country should be a key medium-term agenda of the new government, in our view. Increasing FDI caps in important sectors such as defense and insurance (currently 26%) could turn out to be a game changer, given India's urgent need of technological upgradation in defense equipment's and ii) fast tracking the ongoing agenda of deepening and broadening of the domestic financial markets," Deutsche Bank said in a report.

Revival of Manufacturing Sector:

"Manufacturing sector will revive as Modi believe in giving impetus to the manufacturing sector. Things like single point clearance, good infrastructure and easy availability of land are expected on his agenda," Unison International MD Udit Mittal said.  "Modi in his speeches and manifesto has clearly laid focus on reviving manufacturing sector which automatically will ensure there would be huge number of jobs created". 

Fiscal consolidation:

The top most agenda of BJP as highlighted by various speeches is to gradually reduce subsidy for diesel and cooking gas to reduce fiscal burden. Strictly implement fiscal discipline, without compromising on funds availability for development work and asset creation. Stagnant revenue and sticky expenditure, coupled with a likely tight monetary policy by the Reserve Bank of India (RBI), would make further fiscal consolidation difficult and the job of the new finance minister tough, German brokerage Deutsche Bank has said.


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