India Budget surprises with surge on spending, tax on super-rich
Stocks, bond prices and the rupee all fell despite Finance Minister P. Chidambaram's vow to cut next year's fiscal deficit to 4.8 percent of GDP, which some watchers said counted on ambitious revenue assumptions given hefty spending targets.
There had been widespread expectation, fuelled in part by comments by finance ministry officials, that Chidambaram would present an austere budget in line with the spending cuts he forced on government ministries in recent months.
But the spending plan appeared to have been drawn up with a looming general election in mind, some economists said.
"With a general election not much than a year away, political pressure from within the Congress Party may well have had an influence on the make-up of the Finance Minister's budget," Credit Suisse said.
Chidambaram, a three-time finance minister seen as a candidate for prime minister in 2014, has staked his reputation on cutting swollen fiscal and current account deficits that have alarmed credit rating agencies and triggered warnings that India's sovereign bonds could be downgraded to 'junk' status. There was no immediate comment from the agencies.
"Fiscal consolidation cannot be effective only by cutting expenditure," Chidambaram said in his speech, seen as a balancing act to stave off a credit rating downgrade while meeting demands for populist spending heading
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