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Budget 2013: A chance to leave ‘policy paralysis’ behind

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

In India, the government continues to both talk a good game and walk a decent game, having apparently learnt its lesson after a prolonged period of policy paralysis, before gaining a fresh lease of life with last summer’s economic reforms.

This year also, the government of Manmohan Singh has been unusually active ahead of the budget, scheduled for Feb. 28. Finance Minister P. Chidambaram has just completed a global road show.

In meetings with foreign leaders and institutional investors, Chidambaram spread the gospel that his government is serious about restraining the budget deficit and getting back on track with India’s planned fiscal consolidation. To attack the fiscal deficit, diesel subsidies are being curtailed and passenger ticket prices for trains are being increased.

Chidambaram’s road show may have raised expectations in the investment community with regard to what this year’s budget will contain. The majority of foreign fund managers, however, unlike local residents, normally have fairly low expectations of, and limited interest in, India’s annual budget exercise. With its perennial disappointments in budgetary control, poor implementation record and frequent bias towards populist measures, the Indian budget normally plays very little part in the strategic decisions of foreign fund managers to increase their exposure in India.

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