Expert Zone

Straight from the Specialists

Modi’s first budget can be a great start

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

There are few opportune moments for a nation to enact bold economic reforms. For India, this week is one of them as Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP) government unveil their first budget since sweeping to power in a landslide victory last May.

India needs the sort of shock therapy it administered in response to the 1991 crisis when foreign exchange reserves had dropped to just $1 billion. While current circumstances may be less urgent, they are no less critical. Economic growth has dropped to the 4-5 percent range, half the peak level of a decade ago. Inflation has risen between 9 and 11 percent over the past five years, crippling consumer purchasing power.

The government presence in the economy remains extensive through state-owned enterprises and wasteful subsidy programs that result in chronically high budget deficits. According to the Heritage Foundation’s 2014 Index of Economic Freedom, India’s global ranking was a dismal 120 (out of 186 countries). In the World Bank’s 2014 Doing Business Survey, India ranks 134 out of 189 countries, placing lower than Bangladesh and Pakistan.

Within the components of Heritage’s Economic Freedom Index, India scores very poorly in business and investment freedom (ranked 171st and 142nd, respectively). Launching a business takes more than 25 days on average. Licensing requirements cost almost 10 times the average annual income. (Modi was successful in streamlining licensing requirements in his home state of Gujarat.) There are many bureaucratic barriers to foreign investment. The state retains considerable ownership in the banking sector, and all domestic banks are required to do priority sector lending as directed by the government.

Budget 2013: An opportunity missed

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

Industry leaders have hailed Budget 2013 saying that this is the best Finance Minister P. Chidambaram could have done under the circumstances. Opposition leaders have slammed the budget. Each had their own compulsions but I feel the truth lies somewhere in between.

Budget 2013: Eye on short-term and long-term objectives

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

India’s annual budget always attracts a lot of interest and this year’s edition will be especially important. Budget 2013 is not just significant because it’s the last to be tabled before parliamentary elections due next year but also in light of economic headwinds.

Areas that require immediate attention include the need to invigorate investment, pacify rating agencies, lower subsidies, address structural bottlenecks and jump-start domestic growth. This will require the administration to make tough choices. A turnaround in investment, in particular, is unlikely in the short term.

Budget 2013: What the oil and gas sector expects

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

India’s oil and gas sector, often regarded as the country’s growth engine, has grown by leaps and bounds over the past decade, but the quest to reach the top of global league remains a challenge because of rising under-recoveries and lack of policy incentives.

The sector is a key revenue earner for the central and state governments. In 2011/12, it contributed 2,327.69 billion rupees to central and state governments in taxes, accounting for 20.6 percent of total indirect taxes.

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.

Budget 2013: Getting the wow factor back

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

Gone are the days when Indians used to wait for the budget in February to buy new things. In the 1990s, capital market investors also waited with bated breath for the annual budget to spell out tax and policy measures that affected the fortunes of sectors and companies.

But over the years, the budget lost its wow factor, becoming more of a ritual presentation of the government’s finances, resource allocation, fundraising and spending. This is because most taxes have been rationalized (although some scope still exists) by successive governments and different ministries announce various policy measures throughout the year.

Budget 2013: Focusing on growth Chidambaram’s only hope

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

When P. Chidambaram entered the corridors of  North Block in August last year after his appointment as India’s finance minister for the third time, he had his work cut out.

India was facing fiscal and current account deficits, an infrastructure bottleneck, high inflation, slowing growth and an increasing subsidy burden. Adding to the country’s woes was the threat of a rating downgrade.

Budget 2013: High on expectations again

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(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 2012: Politics is the art of the possible

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(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.

Is the fiscal deficit phony?

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(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.

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