The markets are expecting Prime Minister Narendra Modi's government to table a "path-breaking" Budget, one that could change the course of the nation's economy. The markets may have priced in a "Big Bang" Budget, but the Economic Survey 2014-15 seeks to temper the expectations by describing Big Bang reforms as an "unreasonable and infeasible standard for evaluating the government's reforms actions". India needs to follow what might be called “a persistent, encompassing, and creative incrementalism” but with bold steps, the Survey says.
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Countries are forced to roll out "Big Bang" reforms typically in the event of a crisis, as in 1991, when India was forced to liberalise its economy, but the Survey document believes that India is not in the midst of a crisis currently and, therefore, the need for path-breaking or drastic reforms are not needed. "The cross-country evidence of the post-war years suggests that Big Bang reforms occur during or in the aftermath of major crises. India today is not in crisis, and decision-making authority is vibrantly and frustratingly diffuse.”
The Survey also cites the nature of India's democracy as one of the constraints to drastic reforms. Over the last ten years, the role of institutions has only gained currency. Along with this, India's development is as much a responsibility of states and their chief ministers, a fact that can curb the Centre's policy-making ability. The Survey says: "...Big Bang reforms in robust democracies with multiple actors and institutions with the power to do, undo, and block, are the exception rather than the rule. Not only are many of the levers of power vertically dispersed, reflected in the power of the states, policy-making has also become dispersed horizontally. The Supreme Court
and the Comptroller and Auditor General
have all exerted decisive influence over policy action and inaction."
Finally, the Survey also suggests that critical reforms to improve the tax administration and easing business conditions require patience as they take much longer to carry out. The Survey quotes Max Weber’s phrase, “slow boring of hard boards,” which implies that the finance minister's speech may disappoint the market, which is pegged hopes on a revolutionary Budget