Expert Zone

Straight from the Specialists

Higher growth can help lower deficit

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

India’s bloating budget deficit has been a matter of concern. It means more borrowing by the government which results in overcrowding of the debt market and consequently, a higher rate of interest for the private sector. It also raises the rate on borrowings from abroad due to the downgrading by rating agencies which is bound to follow.

Finance Minister P. Chidambaram had therefore asked all ministries in May to cut non-Plan expenditure by 10 percent and has now banned new recruitment in order to reduce the deficit.

Government expenditure has certainly been getting out of hand, more due to subsidies on food, fertiliser and petroleum products. In the absence of these subsidies, the budget deficit would have been less than 3 percent. But subsidies are politically sensitive and can at best be reduced only gradually. Even a 7 percent cut in subsidies on diesel last September forced a change in the UPA government. Most other expenditures have become sticky and cannot be reduced without comprehensive administrative reforms.

India Market Weekahead: Buy on dips with no roadblocks till budget

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

There wasn’t much point-to-point movement on the Nifty but it was not a listless week by any standard.

Life insurance still struggling, non-life continues to grow

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

The lean half of the financial year for insurance sales is behind us and the numbers for the life insurance vertical are not impressive. But the general insurance or non-life vertical has shown a healthy growth rate. Highlights are given below.

When will the repo rate be reduced?

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

In his policy review on Oct. 30, Reserve Bank of India (RBI) Governor D. Subbarao stuck to his position that money cannot be made cheap when commodities are becoming expensive.

Why financial planning is important

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(The views expressed in this column are the author’s own and do not represent those of either Quantum AMC or Reuters)

The unexpected sight of a familiar pair of shoes placed on the shoe rack at home evoked memories of my dad, who died a few months ago.

RBI policy review: Subbarao could have taken a calculated risk

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

The Reserve Bank governor kept interest rates unchanged on Tuesday with a marginal 25 basis points decrease in cash reserve ratio (CRR), disappointing stock markets and  resulting in the Nifty going below 5640.

The crippling effect of QE3

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

It was tried twice before and it is being tried once again. Whether quantitative easing (QE3) will increase employment in the United States is questionable. But it will certainly disturb currency exchange rates of emerging market economies with related consequences.

Emerging priorities in the war against terrorism

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

There are different models that nations have adopted to fight insurgencies. Sri Lanka used all the forces at its disposal. The results, humanitarian aspects set aside, led to the insurgent movement being defeated comprehensively.

India Markets Weekahead: RBI policy review to be catalyst for markets

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

This was a listless week with the Nifty in the same band of 5640 and 5720 as the previous week, closing about 20 points lower at 5664. The festival  season has begun but the mood on the street remains cautious.

RBI policy: Cut in repo rate imperative

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

The Reserve Bank of India (RBI) is fixated on inflation and with that rigid mindset it is difficult to expect any liberalisation of monetary policy. But there are other parameters that have changed. Food inflation was down in September if that is any comfort. More than that, the budget deficit will be reduced with a cut in subsidies on diesel. There are also initiatives being taken on reforms. Obviously, the RBI needs to tune its policy to fit the new situation. If the RBI does change its stance, what instrument is it likely to use?

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