While   presenting   the Interim   Budget   2014-15, the   Union   Finance Minister Shri P Chidambaram said that in the next three decades India will become the third largest economy behind USA and China.   In future,   the fortunes of China and India will have a significant impact on the rest of the world. Therefore, the Indian Government must be responsible not only to itself but to the whole world by keeping the country’s economy in robust health.

The Finance Minister said that the UPA Government has a clear vision of the goals that have been set for itself. The Minister went on to elaborate the ten tasks that his Government intends to take to achieve those goals.  

i. Fiscal Consolidation: A target of fiscal deficit of 3 percent of GDP must be achieved by 2016-17 and must always be kept below that level.

ii. Current Account Deficit: Since the economy will run a Current Account Deficit every year for some more years, it can be financed only by foreign investment, whether it is FDI or FII or ECB or any other kind of foreign inflow. Therefore, foreign investment must be encouraged.

iii. Price Stability and Growth: In a developing economy where the aim is high growth, a moderate level of inflation will have to be accepted. RBI must strike a balance between price stability and growth while formulating monetary policy.

iv. Financial Sector Reforms: The recommendations of the Financial Sector Legislative Reforms Commission must be implemented immediately as they do not require any change in legislation. Also, a timetable must be drawn for other recommendations that require legislation.

v. Infrastructure: The country must rebuild its infrastructure and add a huge quantity of new infrastructure. Every proven model must be adopted but the PPP model must be more widely used. New financing structures must be created for long term funds and pooling of investments.

vi. Manufacturing: The Government must focus on manufacturing and especially on manufacturing for export. The Minister proposed that all taxes, Central and State, that go into an exported product should be waived or rebated. He also proposed that there should be a minimum tariff protection so that there is an incentive to manufacture goods in India rather than import them into India.

vii. Subsidies: Given the limited resources, and the many claims on the resources, the Government must choose the subsidies that are absolutely necessary and give them only to the absolutely deserving.

viii. Urbanisation: The country’s cities will become ungovernable, and perhaps unliveable, if attention is not paid to the decay in these cities. Cities have wealth and also create wealth. But that wealth should be tapped for resources to rebuild the cities with a new model of governance.

ix. Skill Development: Skill development must rank alongside secondary education, university education, total sanitation and universal health care in the priorities of the Government.

x. Sharing responsibility between States and Centre: States have the fiscal space to bear a reasonable proportion of the financial costs of implementing flagship programmes and must willingly do so, so that the Central Government can allocate more resources for subjects such as defence, railways national highways and telecommunications that are its exclusive responsibility.

Fiscal Consolidation directive to reduce deficits and enable policy focus on infrastructure, manufacturing, and targeted social priorities. The ten-point strategy emphasises fiscal consolidation, financing persistent current account deficits through foreign investment, and a monetary policy balance between price stability and growth. It calls for prompt implementation of financial sector legislative reform recommendations, expanded infrastructure development via PPPs and new long-term financing, promotion of manufacturing for export through tax relief and protective tariffs, targeted subsidies, urban governance and financing reforms, prioritized skill development, and a rebalancing of fiscal responsibility between States and the Centre.