Ahead of Union Budget, PM Narendra Modi hints at 'bitter medicine'

PANAJI/NEW DELHI: In a major speech, Prime Minister Narendra Modi said on Saturday that "bitter medicine" might be needed to rescue the economy and restore its fiscal health even if the measures dent his popularity and hurt BJP in the short run.

The PM's blunt message after his vigorous "acchey din aane waale hai" campaign is seen as an attempt to temper expectations over any dramatic turnaround of the economic situation while preparing the ground for unpopular measures.

"Taking tough decisions and strong measures in the coming one or two years are needed to bring financial discipline which will restore and boost the country's self-confidence", Modi told party cadres.

"I need to take some harsh decisions and administer some bitter medicine in order to resuscitate this patient. The medicine may hurt some of you but I ask for your support at this time," he added later at a separate event.

Modi's plainspeak follows the assessment in the government that the state of the economy is much worse than feared.

"I have taken over the reins of the country in circumstances when there is nothing left behind by the previous government. They left everything empty. The country's financial health has hit the bottom," Modi said while addressing party workers in Goa.

The comments, coming weeks ahead of the Union budget, are seen as an indication of austerity and a check on sops necessary to revive the economy against the backdrop of a tight fiscal situation.

Modi's emphasis on fiscal prudence is driven by sluggish growth in tax collections in the wake of sub-5% growth which has put the spotlight in curbing wasteful expenditure.

Modi's "no gain, without pain" message is intended to put a lid on runaway government spending which will help curb borrowing and reduce the pressure on interest rates. Lower interest rates should help households reduce mortage burdens and spur consumption. It will also result in higher investment by companies which can borrow more at reasonable rates.

Even finance minister Arun Jaitley in his blog on June 1had highlighted "We must commit ourselves to this (fiscal) discipline in order to strengthen the Indian economy...Short term discipline till we reverse the present trend will give us long term benefits"

The 2014-15 budget, expected to be presented in Parliament in the second week of July, will be read as a major statement of intent from the Modi government.