Budget Expectations 2019: ‘India Needs a Reformist Budget’

CRISIL’s Chief Economist Dharmakriti Joshi believes tackling farm distress needs a “twin-track approach.”

The upcoming interim Budget 2019 stands crucial for the Narendra Modi government ahead of general elections. While it is not a regular Budget, it is speculated that the BJP will use it to enlist its vision for the next five years, if it returns to power.

Ahead of the interim Budget presentation on 1 February, Dharmakriti Joshi, Chief Economist of global analytical company CRISIL, suggests that India needs a reformist Budget that stands to redress farm distress, job creation and balancing fiscal trajectory. However, he asserts, this might be a tough combination to achieve.

“India needs a reformist Union Budget that is constructed on three pillars: measures to redress farm distress, measures to promote activities that create jobs, and ensure fiscal trajectory doesn’t go off kilter. Indeed, a tough balancing act.”

Dharmakriti Joshi, Chief Economist, CRISIL

He added that tackling the farm distress of India requires a “twin-track approach.”

'Safety-net Scheme Over Farm Loan Waiver’

Farmers from across the country have been vocal about their distress, taking to the streets in multiple protest rallies to express it. This has made agrarian crisis a major issue for the government ahead of the general elections.

“Increasing allocation to safety-net schemes – or some kind of income support to farmers – will cover the short-term imperative. This is eminently preferable to farm loan waivers, which spawn a moral hazard by creating perverse incentives, and do not benefit a large number of farmers outside the credit net.”

Dharmakriti Joshi, Chief Economist, CRISIL

He lists creating effective farmer markets, improving market access through infrastructure creation, and de-risking agriculture by improving the irrigation buffer and insurance coverage as medium-term imperatives.

‘Activities Having Multiplier Effects Across Sectors Must Continue’

There has been mounting criticism against the Modi government for failing to create jobs during their tenure.

“The sharp focus on supporting construction work (the most labour-intensive activity after agriculture) by creating rural infrastructure, roads and by building houses needs to continue. This would be good economics and politics because such activities have multiplier effects across sectors, and create jobs and productivity enhancements.”

Dharmakriti Joshi, Chief Economist, CRISIL

On Fiscal Discipline

Highlighting the importance of fiscal discipline, Joshi said that vulnerable countries “get punished more in a risky global environment.” This is what the global economy saw in 2013, and the rupee went on a ‘tailspin’, he said.

“The sage advice in a slowing world – with increasing risks and uncertainty – is to maintain macroeconomic prudence and reduce external vulnerability.”

Dharmakriti Joshi, Chief Economist, CRISIL