Budget 2013: India to put investors before voters in pre-election year
Together with a widening fiscal gap, the tax moves triggered a flight of capital from Asia's third-largest economy. The rupee was hammered and, with exports and foreign direct investment slowing, fears of a balance of payments crisis mounted.
New Delhi missed its fiscal deficit target of 4.6 percent of gross domestic product (GDP) in 2011/2012 by 1.2 percentage point because of over-spending on social welfare and subsidies, prompting credit rating agencies to threaten a downgrade that would make India the first of the BRICS emerging economies to lose its investment-grade status.
Chidambaram has repeatedly pledged to lower the deficit to 5.3 percent of GDP this fiscal year and 4.8 percent in 2013/14. But with economic growth languishing around 5.5 percent after the sharpest slowdown in a decade, the finance minister cannot rely on tax revenues to meet his goals.
The finance minister told a budget meeting last month that India had no alternative to meeting the fiscal deficit target and a slippage could have dire consequences, according to a senior bureaucrat who was present at that meeting.
Officials told Reuters that he has already slashed public spending in the current fiscal year that ends in March by some 9 percent from the original target and for 2013/14 he plans to cap it roughly at the same level.
In a Reuters poll conducted earlier this month, 18 out of 23 economists predicted that the focus of Chidambaram's budget speech will be on slashing subsidies and government
Be the first to comment.