Expert Zone

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 should trim expenditure

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

Finance Minister P. Chidambaram is only too aware of the damage done by the last budget and has to an extent repaired it to unleash investment. The next budget should confirm his commitment to growth.

The year the Indian economy stalled

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

The year 2012 has seen the worst an emerging market economy can tolerate. Had the government been a little less reticent and more proactive, growth would not have dropped this low in spite of the economy being mauled by inflation. Other emerging market economies did exactly that.

The burden of India’s cash transfer scheme

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

The government’s cash transfer scheme (CTS) has been accepted by economists as the most  efficient method of delivering subsidies to the poor. This became possible with the identification of the poor after the introduction of “Aadhaar” or unique identity scheme. The scheme is going to be implemented from the beginning of 2013.

Yet another infructuous parliament session?

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

The last session of parliament was a washout. The present one looks to be no different going by its chaotic start.

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.

Economic consequences of deadlock in Parliament

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

The monsoon session of Parliament has been a washout without any important business being transacted. This has been made out to be a political strategy on the part of the Bharatiya Janata Party (BJP) to force early elections. Obviously, the Congress-led coalition is unlikely to oblige. The unintended victim is the economy which has been stopped from getting back to growth.

Why the RBI preferred an SLR cut

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

The first quarter review of monetary policy did not create any ripples. The stock market remained flat and investors and consumers showed little interest. That was because RBI Governor Duvvuri Subbarao had made enough noise earlier that the time was not right and conditions were not suitable for a rate cut.

Consequences of an export squeeze

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

In June, exports shrank more than five percent to $25 billion largely due to recessionary conditions in major importing countries such as the U.S. and the EU. Although exports are not as critical to us as they are to Singapore or China, they do count for a lot.

The growth versus inflation dilemma

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

The RBI is concerned about inflation; the finance ministry has growth as its priority. That, as RBI Governor D. Subbarao mentioned, makes the two almost look like adversaries.

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