February 17, 2014
Abstract: The provisions of the recent interim budget are not important, because in the final budget for the year, the new government is free to alter them. Instead, the real usefulness of the interim budget lies in its nonpartisan national economic policy agenda, which reflects a broad consensus on the problems facing the economy and their solutions. Any party that forms the new government shall embrace this agenda. Some of its elements are:
- Fiscal consolidation, infrastructure and subsidies. The solution to the problems in these areas is best achieved by introducing GST, by greater government investment in infrastructure capital, and by capping subsidies;
- Price stability and higher growth. One significant way to reduce inflation without hurting growth is through intervention in the agricultural sector that aims at improving agricultural production diversity; and
- Current account deficit. Simply put, the true measure of current account robustness is that we export whatever we can produce competitively and not import what we have in plenty at home.
Keywords: interim budget; political consensus; fiscal consolidation; infrastructure; price stability; revival of growth; external vulnerability; current account deficit
