Budget presents the account of the government, its
expenditure, revenue and deficit depending on the economic, social, political
and other requirements in the face of limited resources. Every government tries
to choose between the deficit and surplus as the economy requires keeping the
objectives of price-stability and full-employment in the mind. The economy
increases spending during the downturn
and low growth and increases consolidation during the high growth. Every
economy goes through credit-boom and trade-cycles and might use spending and
consolidation as policies to keep the growth rate highest with low inflation
and unemployment. The consumer-price-index of inflation which is important for
policy making is around 5.69% and unemployment is also low which do not
necessitate aggressive budget announcements.
The significance of
price-stability is known because it reduces the purchasing power of the people,
but full-employment is also very important. Now, every government investment
proposal would estimate the employment generation potential of the project.
Employment is very important for every type of inclusion and to reduce poverty
and inequality. The growth-rate of the Indian-economy, at 7.3%, although lower
than its past performance, but highest among peers, is an important determinant
of investment in any economy which our Finance minister would definitely try to
increase since it has been revised downwards in the past several quarters. The
low global demand and growth may also force the government to get the economy
going through more public-spending. The economy works through multipliers and
we might expect the expenditure at one place to increase expenditure and growth
at other places. It is likely to be an expenditure oriented budget with
emphasis to curb wasteful expenditure and increase revenue through
dis-investment and other sources.
In the yearly
budget the government may try to focus on the removal of constraints over the
economy’s productivity and growth rate. It might seek to de-bottleneck
investment within the domestic economy which has been lagging behind due to
higher interest rate in the past when the economy is yet recovering from a
downturn. Both, agriculture and industry are crucial for low inflation and low
unemployment in the economy. Investment in agriculture is of prime importance
because the higher prices of agricultural products are still a main source of
inflation in the economy and the budget should definitely allocate resources to
correct too much dependence on rains for irrigation. The agricultural growth
rate of the economy is below 2% which is very low and must be increased to
propel the overall economic-growth-rate. A depressed agricultural economy due to droughts and
erratic rains is a major demand setback for the economy because almost 50%
percent of the population in INDIA depends on agriculture for livelihood. The
last two droughts in the past two years have kept the rural demand low which is
clearly reflected in low industrial activity and growth rate. Industrial growth
is vital for employment generation and low unemployment. The prosperity of
agriculture and industry are interdependent, unless the agricultural economy is
sound the industry would face higher inflation and borrowing cost. INDIA’s
agricultural or rural economy constitutes a major source of demand for
industrial products. The agriculture and industry might play a big role in
achieving price-stability and full-employment. When food inflation would go
down, interest rate will follow which could help industry create more jobs.
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