Economic Outlook, Prospects, and Policy Challenges

21

Source: Budget Documents and CSO.

Note: Numbers for 2013-14 and 2014-15 are revised estimates and budget estimates, respectively.

especially if the economy is recovering rather than

surging, pro-cyclical policy is less than optimal.
Debt dynamics also remain favourable going
forward, ensuring a steady strengthening of public
sector balance sheets. Further, accelerated fiscal
consolidation will have to be conditioned in the
upcoming fiscal year by a number of new and
exceptional factors, such as implementing the
recommendations of the Fourteenth Finance
Commission, clearing the compensation obligations
to the states for the reduction in the central sales
tax in 2007-08 and 2008-09, and the need to
increase public investment.
Nevertheless, to ensure fiscal credibility, and
consistency with the medium-term goals, the
upcoming budget should initiate the process of
expenditure control to reduce both the fiscal and
revenue deficits. At the same time, the quality of
expenditure needs to be shifted from consumption,
by reducing subsidies, toward investment. Broadly
speaking, the additional space opened up, including
through a reduction in subsidies and higher
disinvestment proceeds, should be occupied by
public investment. Increases in the tax-GDP ratio,

stemming from the excise tax increases on

petroleum products, will also help achieve both
short and medium term fiscal goals.

1.7

WIPING EVERY TEAR FROM EVERY

EYE: THE JAM NUMBER TRINITY SOLUTION
The debate is not about whether but how best
to provide active government support to the
poor and vulnerable. Cash-based transfers
based on the JAM number trinityJan Dhan,
Aadhaar, Mobile offer exciting possibilities
to effectively target public resources to those
who need it most. Success in this area will
allow prices to be liberated to perform their
role of efficiently allocating resources and
boosting long-run growth.
Sixty eight years after Independence, poverty
remains one of Indias largest and most pressing
problems. No nation can become great when the
life chances of so many of its citizens are benighted
by poor nutrition, limited by poor learning
opportunities, and shrivelled by gender
discrimination (discussed in section 1.13). The