Expert Zone
Straight from the Specialists
Higher growth can help lower deficit
(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.
Finance Minister P. Chidambaram had therefore asked all ministries in May to cut non-Plan expenditure by 10 percent and has now banned new recruitment in order to reduce the deficit.
Government expenditure has certainly been getting out of hand, more due to subsidies on food, fertiliser and petroleum products. In the absence of these subsidies, the budget deficit would have been less than 3 percent. But subsidies are politically sensitive and can at best be reduced only gradually. Even a 7 percent cut in subsidies on diesel last September forced a change in the UPA government. Most other expenditures have become sticky and cannot be reduced without comprehensive administrative reforms.
When will the repo rate be reduced?
(The views expressed in this column are the author’s own and do not represent those of Reuters)
In his policy review on Oct. 30, Reserve Bank of India (RBI) Governor D. Subbarao stuck to his position that money cannot be made cheap when commodities are becoming expensive.
RBI policy: Cut in repo rate imperative
(The views expressed in this column are the author’s own and do not represent those of Reuters)
The Reserve Bank of India (RBI) is fixated on inflation and with that rigid mindset it is difficult to expect any liberalisation of monetary policy. But there are other parameters that have changed. Food inflation was down in September if that is any comfort. More than that, the budget deficit will be reduced with a cut in subsidies on diesel. There are also initiatives being taken on reforms. Obviously, the RBI needs to tune its policy to fit the new situation. If the RBI does change its stance, what instrument is it likely to use?
Time for real reforms, but low-hanging fruits remain
(The views expressed in this column are the author’s own and do not represent those of Reuters)
What seemed to be a lost cause merely three months ago has staged a remarkable comeback: the Indian government’s zeal for reform. After many months of dithering, the ruling Congress party remembered that it had the spine to stand up to fierce opposition from various state governments, finally getting its way on certain measures.
The RBI and its inflation dilemma
(Arvind Chari is a senior fund manager of Quantum Asset Management Company Private Limited. The views expressed in this column are his own and do not represent those of either Quantum AMC or Reuters.)
The wholesale price index number for September (7.81 percent) poses a dilemma for the Reserve Bank of India (RBI). With the finance ministry leaving no opportunity to make its case for lower interest rates and exhorting the RBI to take ‘calibrated risks’, the recent inflation data gives no comfort to the RBI to go ahead and confidently cut the repo rate in its October policy review.
When will India’s reforms show results?
(The views expressed in this column are the author’s own and do not represent those of Reuters)
After a long silence the spell has finally been broken. The second phase of reforms in the country has begun with almost the same conviction as the first but under different conditions. The 1991 reforms were under compulsion but the present reforms are voluntary. This is because the last 20 years have been a test to prove to ourselves that reforms help and they have substantially helped to make the country an emerging market economy.
A good start but we need more reforms
(The views expressed in this column are the author’s own and do not represent those of Reuters)
It’s been a pleasant surprise over the last week or so as the Indian government appears to have transformed itself from allegedly corrupt politicians out to sell the country’s resources (read 2G and coal mines) into a group which means serious business.
That’s the spirit, Mr Prime Minister
(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)
Manmohan Singh’s “if we have to go down, let’s go down fighting” comment is exactly the spirit which needs to be demonstrated by those in power. After all, desperate times call for desperate measures.
Some pain needed for long-term growth story
(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)
The senior Bush’s call for a new world order following the end of the Cold War began unravelling authoritarian regimes which formed its delivery mechanism around the world.
Rating downgrade a credible threat for India
(Rajiv Deep Bajaj is the Vice Chairman and Managing Director of Bajaj Capital Ltd. The views expressed in this column are his own and do not represent those of Reuters)
Indian stock markets have hardly gone anywhere since June, with the Nifty hovering in the 8-9 pct range. But the coming months may see a breakout of this range as volatility, as measured by the India VIX index, seems to be rebounding from four-year lows, after having fallen for three months in a row. A short-term break, out of the range, on the downside seems more probable.
