It is not without reason that the budget proposals are first presented to the lower house of the Parliament consisting of directly elected representatives of the people.
The Budget is expected to reflect the will and desires of the people, and to attain this objective, detailed consultations are held by the finance minister and the government of the day with a broad spectrum of people.
These consultations lead to certain broad objectives which the budget may seek to achieve through specific instrumentalities. The coming budget is likely to embody a significant content of empirical pragmatism or instrumentalism as it likely to address many issues in a pragmatic way, and based on what the end results should really look like.
The challenges faced by the government are quite obvious, there is a need to push the rate of economic growth upwards to 7% plus , a crying need to create more jobs in both urban and rural sectors, definitive measures to counter agrarian distress, more aggressive measures to enhance infrastructure development, address the felt need to consolidate gains of the reorganisation of the domestic banking system with more clear direction on the capitalisation plans, are all things which may get addressed in varying degrees of depth and intensity in the coming budget.
Focus on employment guarantee programme rather than income guarantee programme will be more suitable as it fits in very well to the conditions that are prevailing in the economy at this point of time. Income guarantee programmes tend to be inflationary in nature whereas employment guarantee programs are not so as employment, output and income are likely to maintain a proportionate relationship due to which the impact could be majorly price neutral.
Employment programmes have a positive social impact as they organize workforce in a constructive program which assures income against work or productivity. Reform of rural credit is also an important aspect of reducing or eliminating rural distress as the issues centre around financial distress to a very large extent. The social philosophy of the current government is 'antyodaya'.
The accent on affordable housing, to help every Indian to have a roof over his head is a glowing example of the extremely progressive social orientation.
It is a very meaningful approach as only with a house to live in, the other benefits like drinking water, electricity, sanitation etc. can be made available to the poor.
But the affordable housing program needs to be tweaked a bit to make it more affordable and user-friendly.
The affordable housing program, if strengthened, can give an impetus to several allied activities and sectors like steel, cement, energy, transport etc. This is an area where we could get support from overseas funds also.
But they could ask for greater ease of doing business, something in which we need to put in deliberate attempts to better our ranking.
While so many archaic laws have been junked or abolished much more needs to be done as it will attract funds into India.
We may also need to liberalize overseas investments into government debt as it is a standard international mode to get foreign capital into the country. This would lead to inclusion of government bonds into global bond indexes and funds which track those indexes will move into India, and they generally stay invested for a very long time.
This assumes critical importance given the fact that the government borrowing program is huge bordering on close to ten lakh crores of rupees. So far, the borrowing program has run well thanks to liquidity support from the RBI through open market operations.
But a substantial enhancement of liquidity requires an aggressive approach to opening up the markets further.
The issues surrounding the likely fiscal deficit may not be very material at this juncture, but the fiscal glidepath which the government sets for itself will be closely watched.
Any significant rise in the fiscal deficit or an extra ordinary reliance on the likely transfer of part of the free reserves from the RBI may not be looked at very kindly by investors and agencies based overseas. But these two events may have a very low probability.
The budget could be a pathbreaking one, but only to the extent it is going to address the longer-term issues of the economy and releases the inherent efficacies of the large domestic economy.
K Joseph Thomas is Head of Research at Emkay Wealth Management