India’s Budget: Beyond Fiscal Consolidation

Abstract

India is caught up in a debate between adherence to the FRBM Act and ramping up public investment which shows a tepid trend. India’s repo rate policy has been assiduously linked to the glide path enumerated by Urjit Patel Committee. However, these fiscal consolidation concerns overlook the critical need to address distributive justice, minimize increasing trend of Gini index and pay greater attention to adequate allocation to merit goods sectors like primary education, health and sanitation. The paper underscores the importance of Musgrave’s three pronged emphasis on Allocation, Distribution and Stabilization and highlights the centrality of “Total Factor Productivity” (TFP) of Robert Solow as the real thrust area. The up-coming budget must strike the right balance between fiscal consolidation and allocation prudence to reap the harvest of demographic dividend that awaits India.

Keywords: FRBM Act, Merit Goods, TFP, Demographic Dividend, Glide Path, Gini Index