While the ILG believes that the economy, which is going through a prolonged slowdown, needs a strong demand push, it believes that the path of deficit financing is fraught with risk. Given the fiscal mismanagement by successive governments, it believes there are limitations to the Keynesian approach of kick-starting the economy through increased government spending. Demand needs to be generated through the buying power of the people and that, the ILG is sad to note, has been constrained by the various proposals in this Budget relating to taxation, all of which put the burden of taxes on the salaried middle class.

The ILG stresses the need for sound fiscal management. For this the government needs to focus more on bringing down the revenue deficit by curbing wasteful expenditure. The government will have to take tough measures like cutting down on subsidies and downsizing its staff. The ILG
urges the government to take bold initiatives in these areas and appeals to all political parties to support these measures. It, therefore, deplores the rollback of the price increase for LPG cylinders.

While the ILG is concerned at the lack of growth impulses in the Budget, it commends the various proposals that take significant steps towards freeing the economy. In particular, it appreciates the various initiatives to free agriculture from stifling controls like amending the Milk and Milk Powder Control Order, the move to have an integrated food law, and decanalising exports. However, it notes with concern the fact that the Budget has not made any mention of the reform of the food procurement system, especially the minimum support price. It is this that is responsible for the mounting foodgrain stock even as there are starvation deaths.

Other proposals which the ILG commends include steps to increase private sector involvement in various infrastructure sectors, the further de-reservation of the small scale sector (though we believe it is too little and too late) and the initiatives for urban development in the form of an Urban Reform Initiative Fund and the City Challenge Fund.

At the same time, the ILG believes budgets are not made in isolation from the larger policy environment. there are a number of economic Bills awaiting clearance and which can determine whether the objectives that the finance minister has set for the country are fulfilled or not. These include the Electricity Bill, the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and amendments to the Industrial Disputes Act and the Contract Labour Act. The economy is in dire need of structural reform and these bills will help that process. The ILG hopes the Government will follow all its reform-oriented announcements with implementation and hopes that all political parties will offer constructive and informed support to these measures.