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from Expert Zone:

Tough to get the math right in 2014/15 interim budget

(Any opinions expressed here are those of the author and not of Thomson Reuters)

Finance Minister P. Chidambaram went more by economic considerations than political ones in manoeuvring his pre-election budget, the focus being on fiscal consolidation with an eye on rating agencies.

The 2014/15 interim budget did not have any new populist measures. The minister may have been convinced that such gimmicks just before elections do not yield votes. Also, there was hardly any time to effectively roll out a new scheme.

The long-term policy target Chidambaram had set himself was to reduce the budget deficit to 3 percent of GDP. This is necessary to bring about price stability, reduce government borrowing, prevent overcrowding in the market and leave more financial resources with the private sector for investment. Although the budget engineering was on these lines, the way deficit has been restrained would not amount to fiscal consolidation.

For the current year, the deficit has been reduced to 4.6 percent from the budgeted 4.8 percent. This was possible in spite of an excess 49 billion rupees of non-Plan expenditure, which admittedly was not much in a 15.9 trillion rupee budget.

from India Insight:

Interview: Chidambaram on Modi, Rahul Gandhi and becoming PM

By John Chalmers, Frank Jack Daniel and Manoj Kumar

(This article is website-exclusive and cannot be reproduced without permission)

P. Chidambaram, now in his third stint as finance minister, spoke to Reuters about Narendra Modi and the 2014 elections in an interview on Monday ahead of a trip to the United States. Here are edited excerpts from the interview:

If Congress returns to power in the elections next year and Rahul Gandhi is the prime minister, do you see yourself as finance minister?
That’s a question you should put to the prime minister. I am glad you acknowledge Prime Minister Rahul Gandhi but that is a question you should put to him.

from India Insight:

Interview: Chidambaram on the state of India’s economy

By John Chalmers, Frank Jack Daniel and Manoj Kumar

(This article is website-exclusive and cannot be reproduced without permission)

The Indian government will have to rein in spending and cut subsidies to meet its fiscal deficit target, Finance Minister P. Chidambaram said on Monday, underlining that an austerity drive will not be blown off course by an election due next year.

The urbane Harvard-educated lawyer, now in his third stint as finance minister, spoke to Reuters in an interview ahead of a trip to the United States. Here are edited excerpts from the interview:

from Expert Zone:

Why the rupee is linked to jobs in the U.S.

(Any opinions expressed here are those of the author and not of Thomson Reuters)

It appears odd that an increase in job offers in the United States should pull the rupee down in India. After all, any improvement in the U.S. economy should benefit the rest of the world. It means an increase in imports by the U.S. and exports by other countries. But there is more to it than that.

from India Insight:

India’s love for gold and the government’s efforts to curb it – a timeline

Google Trends shows that the term “current account deficit” is among top searches from India in 2013. Add “gold” as a comparative keyword and the searches for the commodity Indians love are far higher.

Indians buy gold for everything – investment, gifts, wedding ceremonies and auspicious days. But of late, this has become a pain for policymakers.

from India Insight:

L&T Infra Finance CEO upbeat on India’s economic recovery by 2015

India's economy recorded its slowest growth in a decade in the fiscal year ending in March but the CEO of L&T Infrastructure Finance, that provides loans to companies such as Jaypee Group to develop roads and other infrastructure, is hopeful of an economic turnaround in less than two years that will boost business prospects.

The company, part of India's largest engineering and construction conglomerate Larsen & Toubro, will likely end up dealing with a slowdown in business growth in the current financial year, but might bounce right back next year if the winner of India’s federal elections due in 2014 starts spending on infrastructure projects.

from Global Investing:

India’s deficit — not just about oil and gold

India's finance minister P Chidambaram can be forgiven for feeling cheerful. After all, prices for oil and gold, the two biggest constituents of his country's import bill, have tumbled sharply this week. If sustained, these developments might significantly ease India's current account deficit headache -- possibly to the tune of $20 billion a year.

Chidambaram said yesterday he expects the deficit to halve in a year or two from last year's 5 percent level. Markets are celebrating too -- the Indian rupee, stocks and bonds have all rallied this week.

from India Insight:

Taxing times for reporters on the Chidambaram beat

(Any opinions expressed here are those of the author and not necessarily of Thomson Reuters)

Finance Minister P. Chidambaram’s drive to shore up government coffers is not just giving businessmen sleepless nights.

from Expert Zone:

India Markets Weekahead: Beware the Ides of March

(Any opinions expressed here are those of the author and not of Reuters)

Markets ended budget week below support levels of 5800/5840 and just when the six-month rally seemed over for good, it made a spirited V-shaped recovery to close at 5946 on Friday, with gains of 3.95 percent. The Street is divided with some expecting this to be the beginning of a new rally with the market scaling highs that it missed in February; others see it as a strong pullback which will fizzle out soon.

The government seems to be responding faster to allay investor fears. It was quick to respond to FII worries over proposed changes in tax residency certificates. Finance Minister P. Chidambaram has been assuring investors of continued policy measures, including the Direct Taxes Code (DTC) bill being introduced in the current parliament session.

from Expert Zone:

Budget 2013: Political strategy, not economic blueprint

(Any opinions expressed here are those of the author and not of Reuters)

With the dust settling after Budget 2013, the picture is getting a bit clearer. Opinions on the budget have ranged from praise to outright criticism. The true position lies somewhere in between -- depending on one’s political inclination, views on the finance minister and one’s financial interests.

Most agree there is considerable misalignment between diagnosis and prescriptions in the budget. The three biggest problems identified by P. Chidambaram are:
- rising fiscal deficit that needs to be controlled
- high current account deficit and
- declining economic growth rate.

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