With just three months to go before Indian Prime Minister Narendra Modi completes his first year in office, expectations are running high as his government prepares to unveil its annual budget on Saturday, Feb. 28.
Investors and economists are hoping that the government will use the occasion to announce reforms that make India more business-friendly, hacking away at red tape and obstructive laws, and opening up the economy to help it grow faster.
Here are five things to know as Modi’s Finance Minister, Arun Jaitley, prepares to unveil the budget in the lower house of the Indian Parliament:
1. Modi’s first budget was underwhelming. Presented less than two months after he came to power on a platform of boosting economic growth, the Modi government’s first budget was widely judged a disappointment, lacking the kinds of initiatives that economists said were necessary to overhaul the Indian economy. This time round, the Modi administration has had months to prepare and the country will be looking for wide-ranging reforms to back up his promises to revitalize the Indian economy.
2. The budget comes as Modi faces growing opposition to his reformist agenda. Although the Modi government has a majority in Parliament’s lower house, it lacks the numbers to push through laws in the upper chamber. As a result, Modi has resorted to a series to executive orders to introduce reforms — including a controversial move to speed up the acquisition of land for industrial projects. That executive order, known as the land ordinance, has sparked opposition from rival political parties as well groups representing Indian farmers, who say it privileges the wishes of corporations over the welfare of poor landowners. Earlier this week, the Indian anticorruption crusader Anna Hazare was joined by Delhi’s new chief minister Arvind Kejriwal as he led protests against the land ordinance, which, like Modi’s other executive orders, must eventually be ratified by the Indian Parliament.
3. In an unusual move, India’s share markets will remain open on Saturday, according to an announcement from the National Stock Exchange and the Bombay Stock Exchange, underscoring the high expectations ahead of the budget announcement by Jaitley.
4. The budget for India’s sprawling railway network has already been announced. And it pointed to an emphasis on improving the country’s aging transport infrastructure, with the Modi government unveiling plans to invest some $137 billion over the coming five years to modernize India’s vast rail system.
5. Tax reform could be among the key talking points this weekend. Jaitley may announce fresh exemptions to personal income taxes, as he attempts to drive up both savings and disposable income for the country’s middle classes. All eyes, however, will be on a proposal to do away with a series of indirect state and central government taxes on goods and services, which critics say have balkanized the Indian economy, and replace them with a single Goods and Services Tax (GST). The idea is to reduce the paperwork and hurdles faced by companies — and turn India into a common market. There are hopes that Jaitley will use his budget speech on Saturday to announce a timeline for the implementation of the GST.