Asia's third-largest Economy is facing its worst economic slowdown in nearly a decade, with shrinking manufacturing, slower jobs growth and high inflation limiting the government's ability to offer sops to voters or companies to boost growth.
Minister P Chidambaram is likely to make a last-ditch attempt to win back voters by announcing more funds for health, rural jobs, roads and food subsidies, Finance Minister P Chidambaram will be walking a tightrope when he presents an interim Budget for the coming financial year on Monday, doling out more funds to woo voters and tax cuts to support industry while projecting a lower fiscal deficit before elections. Asia's third-largest economy is facing its worst economic slowdown in nearly a decade, with shrinking manufacturing, slower jobs growth and high inflation limiting the government's ability to offer sops to voters or companies to boost growth. Officials said Finance Minister P Chidambaram is likely to make a last-ditch attempt to win back voters by announcing more funds for health, rural jobs, roads and food subsidies, and to speak about the government's achievements in 10 years.
Chidambaram will have slightly more manoeuvring room after an auction of telecommunications spectrum that ended on Thursday brought in a much higher-than-expected $9.85 billion in bids. The government will get at least $3 billion of that upfront in the current financial year, with the rest spread out till 2026.
so what are the steps taken in due course??
Since taking charge last August, Chidambaram has taken many steps such as reducing spending on gold imports to rein in the fiscal and current account deficit that helped stave off the threat of credit rating downgrades last year.
He is also is expected to cut factory-gate duties on products like automobiles to support the manufacturing sector, extend an interest subsidy on bank loans to exporters, farmers and offer tax concessions for poorer regions.
FUTURE PROSPECTS
The economy is projected to grow by 4.9 per cent for the current financial year ending in March, much lower than the more than nine per cent growth seen before the 2008 global financial crisis. Annual retail inflation remains uncomfortably near nine percent.
Chidambaram is likely to project a near six per cent GDP growth and a fiscal deficit target of 4.2 per cent of gross domestic product for the coming financial year.
He is expected to report a fiscal deficit of nearly 4.8 percent of GDP for the current fiscal year, helped by sharp spending cuts, higher receipts from the sale of telecoms spectrum and dividends from state firms.
"We will surprise everyone on the fiscal deficit numbers," a senior finance ministry official told Reuters. "The government is expected to cut budgeted expenditure by 550-650 billion rupees in sectors like roads, metro rail, defence and power sectors to meet the deficit target," said another government source.
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