Noted chartered accountant Dr B L Tekariwal believes that the general budget of the Congress-led UPA government is likely to be a populist one as it would reflect party's election manifesto.
The budget is coming at challenging times against the backdrop of economic revival optimism, moderate economic growth scenario, doubling core sector growth, macro number holding out hopes, high fiscal imbalance, zooming FMCG sector, positive dynamics and rising FDI and Sensex.
Talking to UNI Dr Tekariwal said the budget being the policy document, has to draw the right balance to ensure double digit growth by fine tuning the policies, accelerating reforms, especially financial sector, labour, pension, power and agrarian reforms, raising FDI cap, investment in infrastructure, full convertibility, structural reforms and harness human capital.
He said the focus of budget should be on checking fiscal profligacy, revival of rural economy, achieving FRBM targets, promote inclusive growth, building infrastructure with higher government investment and translate outlays into outcome.
Out of total budget allocation, 30 per cent of the expenditure is only on development and 23 per cent goes on interest, 14 per cent on defence, 11 per cent for salaries and pensions, eight per cent towards subsidies, and non-plan expenditure needs 14 per cent.
He opined that the implementation of manifesto promises would add further pressure on budget expenditure.
''There is a need for transparency and a holistic review of these allocations to provide more for development expenditure considering the needs of the growing economy and to ensure growth with equity,'' he said.
Heavy interest burden of 23 per cent could be curtailed drastically by reducing the size of public debts, which presently constitute 80 per cent of the GDP.
Likewise, defence expenditure should also be reviewed in the present context. The non-plan expenditure should also be reviewed in totality to bring it down to spare resources for capital expenditure and capital formation.
The target of zero revenue deficit appears to be difficult to achieve considering it is more than 4.4 per cent at present, he opined.
In the changing situation, the fiscal consolidation is the only answer and as such subsidies need to be abolished and non-plan expenditure by downsize by the government as suggested by the Pay Commission.
''It is the time to heed danger signals. Progressive policies and firm decision are the need of the hour and reforms should be accelerated by implementing big ticket reforms like Labour Reforms for flexible labour laws, Financial Sector Reforms, Comprehensive Pension Reforms and Disinvestment of PSUs to ensure double digit growth,'' he said.
Mr Tekariwal said infrastructure, especially power sector, should get thrust to make them at par with global standards. Ultra Mega Power Projects (UMPPs) should continue to get tax holiday.
New national policy for farmers should be announced to provide food security and curtail the import bill of food and cereals, which are increasingly in short supply, he said.
He also added that the organised retail sector with a market potential of 85-90 billion dollar should be encouraged and the foreign exchange reserve at 293 billion dollar should be ploughed back either in Sovereign Wealth Fund (SWF) or a State owned investment vehicle to fetch higher returns.
The chartered accountant stated that,'' Talent pool in the form of social development zones (SDZ) can be set up to harness human capital and fill up the crunch worldwide.'' BPO industry has a potential of 50 billion dollar revenue for which BPO hubs should be set up in Tier II & III cities, he said adding that the social sector reforms especially in education and health should be given special thrust.
There should also be a need to check regional imbalances by harnessing growth potential in BIMARU states and eastern part of the country.
In the field of direct taxes, subsidiary taxation in the form of Surcharge, MAT, FBT and Dividend Distribution Tax should be abolished to make tax laws simpler, he said and observed that Wealth Tax should also be abolished.
Tax exemptions and subsidies should be phased out and direct taxes code should be revisited.
Threshold limit for personal income tax should be increased to Rs two lakhs and tax slabs should be restructured. In indirect taxes, roadmap for GST should be chalked out and custom duty rates should be rationalized to two at flat rate of 5 and 10 per cent.
Dr Tekariwal also suggested the ecomony should be revived and public spending should be encouraged to boost the demand.
He asked the government to accelerate the reforms by giving thrust on unfinished agenda like pension and insurance reforms, labour reforms and fiscal reforms. Reforms on subsidies and expenditure should also be initiated.
Another major area was disinvestment and privatisation of profitable Public Sector Undertakings to fetch high returns, which the government can use to meet high fiscal deficit.
Fiscal consolidation on public financial is necessary, he said adding that the combined fiscal deficit of states and centre is expected to be higher than 11 per cent and as such government should bring out a white paper on fiscal situation to achieve fiscal targets.