Was the Union Budget about Third Generation Reforms …?

The MoS for Finance, Jayant Sinha, made an interesting reference to Third Generation Reforms in the aftermath of the Union Budget. Was he really serious? To an extent yes! First generation reforms began in 1991 when India opened up the doors of the Indian economy. Duties were cut, licensing was scrapped and foreign investors were permitted to come in. This was, probably, the first and last big-bang budget which actually redefined the contours of the Indian economy.

What about 2nd Generation…

In a way the 2nd generation reforms began in right earnest in 2002. At the height of pessimism, India embarked on an exercise of cutting personal taxes, investing in infrastructure and creating world class companies. It would be ambitious to say that India has achieved that target but the time was always ripe to embark on the third generation of reforms. So what exactly is that?

Welcome to 3rd Generation…

The first two generations of reforms had a few downsides. The GDP had been growing but the GDP per capita still left a lot to be desired. India ranks much lower than Asian and Latin American peers when compared on parameters like GDP per capita and Tax/GDP. This is one of the first challenges before the Indian government. The second challenge was the creation of world class infrastructure. We are not only referring to infrastructure in terms of roads, railways and ports; but also in terms of manufacturing and manpower infrastructure. The third area of focus should be on creating, encouraging and nurturing the spirit of entrepreneurship. To what extent has this Union Budget succeeded in these goals?

To be fair, a start is made…

A start has surely been made in this budget! Putting more money in the hands of people is the right step. The focus on renewable energy is laudable. We have lagged behind in meeting our power needs and renewable should be the way forward. This budget needs to be lauded for that. There has been a strong focus on empowering the youth with better education, better intellectual software, better training and better focus on enterprise opportunities.

But in a way it is a “Make in India” budget. India has long been focused on creating an army of cyber supporters with limited value addition. India can no longer compete on low cost. India needs to compete on technology, design, efficiency and processes. This budget is important because it dares to make a statement. A statement that Indian engineers, technologists and managers are in no way inferior to the best in the world. If this gamble works, then there is nothing stopping India’s tryst. Welcome to 3rd Generation Reforms! ©

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