Expert Zone

Straight from the Specialists

Budget 2013: Reduce fiscal deficit, make poor richer

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

A lot of expectations are riding on this year’s budget. And it’s not difficult to see why.

The last 18 months or so have been poor for the Indian economy with decelerating growth and a relatively weak currency reflecting the widening current account deficit. The persistence of inflation had kept the RBI on hold and this did not help the stock market. Financial scandals and seeming political indecision as far as deregulating the economy, at least till recently, were not conducive to confidence.

The budget, which authorities promise will deal with the issues of fiscal deficit and of the role of state spending in fostering growth, is bound to raise expectations which may not be fully met. Politics is the art of the possible and not necessarily of the desirable.

A key issue which has bedevilled Indian fiscal policies has been the redistributive role of the budget, in using fiscal resources to address poverty. In other words, reduction of subsidies, be they in cooking fuel or rail fares hits the brick wall of the objection that this would hurt the poor. Unfortunately this gets hold of the wrong end of the stick. Woody Allen memorably remarked that “poor people are poor because they do not have money”.

Budget 2013: India has no room for a populist budget

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

It is still a good year into the next general elections, yet India’s two main political parties have already set the stage for a showdown. The opposition Bharatiya Janata Party is closing in on the Congress party, according to opinion polls. Even though it is still early days, this puts even more pressure on the ruling party.

Last autumn, the Congress had a change of heart with its policy priorities, having realized that dithering on industry reforms would be a safer way of losing votes than pushing ahead with unpopular measures. It ploughed through opposition to liberalize foreign direct investment, and it mainly succeeded, although progress on fiscal housekeeping, such as raising power tariffs and cutting diesel subsidies, has come at a much slower pace. Other potential measures did not happen at all. Nonetheless, the party has raised hopes and expectations that it can get India’s act together.

Budget 2013 wishlist: What the IT industry wants

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

This has been one of the most challenging years for the IT and business process outsourcing (BPO) industry in India with global economic uncertainty affecting revenue growth.

The world is facing a “balance sheet recession” resulting in slower growth and greater volatility. While we have seen some stability in developed economies in the recent past, the worst is far from over for the industry.

Budget 2013 wishlist: IT industry expects policy changes

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

Despite volatility in the global economy, the Indian IT and business process management (BPM) industry has grown steadily and is set to cross the $100 billion milestone according to the National Association of Software and Services Companies (NASSCOM).

From a modest 1.2 percent in FY1998, the sector’s revenues now contribute around 7.5 percent of the country’s GDP. The industry provides direct employment to about 2.8 million Indians and indirectly employs 8.9 million people.

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