Factbox: Key political risks to watch in India
RATINGS (Unchanged unless stated):
Following is a summary of key political risks in India:
ELECTIONS AND ECONOMY
In his budget at the end of February, Finance Minister P. Chidambaram defied market expectations of spending cuts by promising a bigger outlay for the coming fiscal year, which falls just before an election.
The budget was an illustration of how he and Prime Minister Manmohan Singh are being pulled in different directions: by foreign investors who want fiscal discipline and reform, and by voters at home who would react badly to anything resembling austerity measures.
Total budget expenditure will hit 16.65 trillion rupees ($309 billion) in the new fiscal year that begins on April 1, Chidambaram said, in comparison with spending in the 2012/13 fiscal year that is on track to hit 14.3 trillion rupees. Even while pledging higher spending, he said he had "no choice but to rationalise expenditure".
Ratings agencies Standard & Poor's and Fitch have threatened a downgrade if the fiscal deficit is not tamed.
Chidambaram, who has staked his reputation on hitting a fiscal deficit target of 5.3 percent of GDP this year, has tried with some success to please investors, introducing reforms such as allowing
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