Indian budget to carry out tough balancing act
Himalayan News Service
New Delhi, July 7:
India’s new finance minister P Chidambaram will have to do a tough balancing act as he gears up to unveil the annual financial budget with a view to spurring investments and putting the economy on a higher trajectory of growth. Analysts say Chidambaram, who assumed office on May 24, may derive comfort from the fact that the overall economic growth is on a roll, foreign exchange reserves are overflowing and consumer spending is booming. But to his discomfort, the financial market is in disarray and India still suffers from archaic labour laws, growing unemployment, deteriorating fiscal deficit and rising fuel prices in the global market.
Further, the country of over one billion people and Asia’s third largest economy remains a small dot in the world map when it comes to foreign investment. Harvard-educated lawyer-turned-politician Chidambaram, 58, will unveil the Congress-led United Progressive Alliance government’s maiden financial budget for the current fiscal year ending on March 31, 2005.
“This is certainly not going to be a fire-fighting budget with the overall economy doing really well,” said Subir Gokarn, chief economist of the independent credit rating firm CRISIL, “But this budget is going to be crucial in terms of addressing the long-term issues like facilitating investments, creating robust infrastructure, consolidating the fiscal situation and accelerating the reforms process.”
“All of these issues are very important for sustained higher economic growth. These issues have not been dealt with very seriously in the last few years. Overall, I think the finance minister will be compelled to present a please-all budget,” he said. Economists warn that managing the economy of India at this point of time is not at all going to be easy. Although the economic growth is quite satisfactory, any complacency might prove to be very risky, they say. The Indian economy grew by a better-than-expected 8.2 per cent in the last fiscal year that ended on March 31, on the back of a sharp pick-up in agricultural output, making it one of the fastest growing economies globally. But analysts say Chidambaram, who was finance minister from 1996 to 1998 and initiated a slew of crucial measures like cutting capital gains and company taxes, will have to introduce a fresh dose of reforms needed to sustain growth.