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Straight from the Specialists

Risk factors in Budget 2013

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

Finance Minister P. Chidambaram has apparently done the impossible. He has brought down the fiscal deficit in the current year from the budgeted 5.3 percent to 5.2 percent in spite of the fall in revenues. What’s more, the deficit was further slashed to 4.8 percent in the 2013/14 budget. Is that realistic?

Look at the expenditure. In the current year, subsidies on food, petroleum products and fertilizer were up by 676 billion rupees or 36 percent. These are precisely the expenditures the minister had to curtail, though he did make an effort to do that too late in the day. With the jump in non-Plan expenditure, the fiscal deficit could be brought down only by cutting Plan expenditure.

Budget 2013 is designed to rev up economic growth by correcting expenditure imbalance. Chidambaram has proudly declared that Plan expenditure will be up next year by 29 percent from the revised estimate. Non-Plan expenditure also increases, though at a lower rate of 10 percent.

Subsidies have also been targeted in the budget. Total subsidies will be down by 266 billion rupees or 10 percent. The sharpest subsidy cut (319 billion rupees) will be on petroleum products. The finance minister has also provided an additional subsidy of 100 billion rupees on food but may have to shell out much more if the Food Security Bill is passed in the budget session.

Budget 2013 not a death knell for reforms

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

In announcing the new budget, Finance Minister P. Chidambaram tried to square the circle. On the one hand, with the prospect of elections next year or possibly sooner, handing out costly goodies was always going to be a temptation. On the other hand, like its Western counterparts, the Indian government was faced with the fact that it must rein in public spending, which could anger some voters, not to mention dampen economic growth.

The trick, therefore, was to cut spending on areas where the negative impact would be least damaging. On that count, the budget met our expectations. We had long thought the deficit could be cut from 5.2 percent of GDP to 4.8 percent in 2014. And while the underlying nominal GDP growth assumption of 13.4 percent may be a stretch, we didn’t think it was beyond the realm of possibility.

Budget 2013: A run-of-the-mill affair

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

After the sustained hype of a game changer budget, Budget 2013 was a totally run-of-the-mill affair with no announcements of any kind of deregulatory or growth propelling initiatives.

True enough, some of the more promising measures taken in the last 12 months were not related to budgetary statements. Not surprisingly, the Sensex greeted Budget 2013 by falling.

Budget 2013: A high-calorie budget

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

India’s left-leaning government believes in the ‘eat more, burn more’ philosophy in managing its finances. Budget 2013 takes that idea further with an even stronger projected rise in spending.

If the increased spending is aimed at productive use, it may still end up doing some good. But the track record does not inspire confidence. I hope that after talking the talk, the finance minister will not lose his nerve when it’s time to walk the walk.

Budget 2013 does have some words of wisdom

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

The finance minister had a tough job in hand with this being the government’s last budget before elections due in 2014. P. Chidambaram had to focus on fiscal consolidation while walking a tightrope between populism and pragmatism.

In my previous column, I had written about the issues he needs to address. Here’s a look at how Budget 2013 fared on these counts.

Budget 2013: An opportunity missed

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

Industry leaders have hailed Budget 2013 saying that this is the best Finance Minister P. Chidambaram could have done under the circumstances. Opposition leaders have slammed the budget. Each had their own compulsions but I feel the truth lies somewhere in between.

Budget 2013: Visible impetus on growth

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

Finance Minister P. Chidambaram presented the annual budget at a time when India’s economy is going through a challenging period. India faces the four-pronged problem of high fiscal deficit, an unacceptably high current account deficit, declining growth and lower savings.

South China Sea: The zero-sum game

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

The Chinese have shown far greater alacrity in resolving disputes over land boundaries with neighbours than in drawing lines across international waters that they claim. A nation with land borders with 14 countries has settled its disputes with 10 of them, but finds it difficult to resolve its problems in the South China Sea.

Budget 2013: Balancing fiscal prudence and populism

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(Rajiv Deep Bajaj is the Vice Chairman and Managing Director of Bajaj Capital Ltd. The views expressed in this column are his own and do not represent those of Reuters)

With a four-month equity rally showing signs of fatigue, the focus is on Budget 2013 to provide further impetus.

India Markets Weekahead: Prudent to wait for the budget

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

After showing promise early in the week, the markets turned gloomy on Thursday with a sharp correction, ending the week with a 0.63 percent fall at 5850 – close to the support levels of 5840 which hasn’t been violated on a closing basis.

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