Expert Zone
Straight from the Specialists
The threat of a junk rating
(Any opinions expressed here are those of the author and not of Thomson Reuters)
Credit ratings by agencies are never very objective and their long-term outlook is also seldom accurate. Sovereign ratings, in particular those which are not solicited, are generally unreliable and often biased. But rating agencies do draw attention to critical issues that should not be ignored.
Standard & Poor’s announced on Friday that it had maintained India’s rating at BBB- with a long-term negative outlook. This assessment is based on three major considerations. The budget deficit, government debt and the current account deficit (CAD) are too high.
The fiscal deficit has been at the centre of debate and action for more than six months and the finance minister has brought it down from 5.7 percent last year to 4.8 percent in 2013-14 with the assurance that it will be brought down further. But there are still doubts.
Debt is not yet a big problem for India though it has its ramifications. Going by the IMF, government debt in Japan is 236 percent of GDP, 107 percent in the United States and 88 percent in the United Kingdom. For India, it is 67 percent with a foreign debt component at 4.7 per cent of GDP. Debt has a cost. In the current year, for example, interest payments by the central government would be 3.7 trillion rupees, which would be 22 percent of the total expenditure or two-thirds of the budget deficit.
Budget 2013: A rather ambitious budget
(Rajan Ghotgalkar is Managing Director of Principal Pnb Asset Management Company. The views expressed in this column are his own and do not represent those of either Principal Pnb or Reuters)
Rating agencies have left India’s sovereign rating unchanged after the 2013 Budget. A rating downgrade would mean India getting junk status which is certainly not something one would want when the current account deficit is widening.
Budget 2013: A run-of-the-mill affair
(Any opinions expressed here are those of the author and not of Reuters)
After the sustained hype of a game changer budget, Budget 2013 was a totally run-of-the-mill affair with no announcements of any kind of deregulatory or growth propelling initiatives.
True enough, some of the more promising measures taken in the last 12 months were not related to budgetary statements. Not surprisingly, the Sensex greeted Budget 2013 by falling.
Budget 2013: Chidambaram’s chance to bell the cat
(Any opinions expressed here are those of the author and not of Reuters)
This year’s budget will be an interesting one and it will hopefully be more pragmatic than populist.
Not much has changed since Pranab Mukherjee presented the budget in 2012. At the time, India was battling high inflation at 9 percent, fiscal deficit at 5.9 percent of GDP and a current account deficit (CAD) at 4.2 percent of GDP.
Budget 2013: High on expectations again
(Any opinions expressed here are those of the author, and not those of Reuters)
It’s budget time in India once again, the annual month of anxiety and expectations that everyone awaits with bated breath.
Budget 2013 will be especially important on two counts. Coming as it does ahead of crucial state elections, the Feb. 28 budget could be outrageously populist. But with the government not really following through on its policy reforms in recent months, the question is how intent can translate to concrete action. Tough decisions are needed with a greater focus on growth.
Budget 2013 should trim expenditure
(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.
Is the fiscal deficit phony?
(The views expressed in this column are the author’s own and do not represent those of Reuters)
The stock market did not respond positively to the budget in spite of the cut in Securities Transaction Tax (STT) and the provision of tax benefits to retail investors for investment in equity because of the trust deficit in budget arithmetic. The fiscal deficit is too high and could also escalate during the year considering that the assumptions on which it is based are not realistic.
Why the budget is under stress
(The views expressed in this column are the author’s own and do not represent those of Reuters)
In the first seven months, the fiscal deficit crossed three-fourths of the target set for the year. This was entirely because the liberal expenditure on current account was not covered by the revenue the exchequer earned. It is quite on the cards that fiscal deficit for the year will exceed the target.
Fiscal deficit to kick up growth
(The views expressed in this column are the author’s own and do not represent those of Reuters)
In the first quarter of 2012, the government will be over-crowding the financial market to mop up nearly a trillion rupees. It is forced to borrow mainly because the expected revenue did not come in while the expected expenditures had been met.
Budget FY 2012: A neutral event
(The views expressed in this column are the author’s own and do not represent those of Reuters)
The FY 2012 Union Budget is largely a neutral event:
The Budget provides incentives for increased infrastructure spending along with increased funding sources while highlighting supply side issues in agriculture with an effort to provide solutions.
