Straight from the Specialists
(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.
What we found interesting is that the planned portion of the budget, which includes schemes for rural areas and construction, is programmed to rise by about 29 percent, whereas the relatively large non-planned portion should rise by a mere 11 percent. The latter includes expenditure on government operations that hardly help stimulate growth, as well as subsidies which are slated to fall by a heartening 10 percent.
The upshot of this manoeuvre is that it improves the budget mix: the spending on the more productive areas outpaces the economic growth rate, whereas the spending on the less productive ones rises at a slower pace, or even shrinks.
(The views expressed in this column are the author’s own and do not represent those of Reuters)
The stream of criticism directed at the 2012-13 budget misses the point that this is the best the coalition government could offer under the circumstances.
(The views expressed in this column are the authors’ own and do not represent those of Reuters)
The technology sector is set to cross the $100 billion mark this year with $69 billion from exports and $32 billion from the domestic market. This is a healthy increase of around 16 pct over last year’s growth despite global economic events such as the anti-outsourcing bill in the U.S. and the euro zone crisis which had an impact on the sector.