India needs a transformational Budget

WHEN he presents his government's maiden Budget tomorrow, Indian Finance Minister Arun Jaitley will have his first big opportunity to give some substance to the ambitious economic reform agenda of which newly elected Prime Minister Narendra Modi spoke so passionately during his election campaign.

Expectations are running high. The Indian electorate is impatient for change and investors are expecting it: India's stockmarket indices have jumped more than 20 per cent this year in anticipation of pro-growth reforms. If it is to meet these expectations, Mr Jaitley's Budget will need to at once spell out a vision for transformation and a set of policies to get the process going.

One of his key priorities should be to chart out a credible roadmap to bring down India's fiscal deficit, which is running at close to 5 per cent of GDP, against a target of 4.1 per cent. He will face constraints here. On the expenditure side, there are mega-plans to expand infrastructure spending in all areas and social spending is hard to cut - if anything it should be increased, especially in areas such as health and education. However, there is scope to reduce some subsidies - for example, on energy. But there are big opportunities on the revenue side.