Notwithstanding the uncertainty surrounding the eurozone economies and concerns over faltering economic recovery in the U.S., the Indian economy is poised to grow by double-digits soon. Recently, there have been many positive developments on the domestic front which may augur well for India's trillion-dollar economy.
Last month, the government freed pump prices of petrol from administrative control and increased prices of heavily subsidized kerosene, LPG and diesel, paving the way for more painful reforms in the next 2-3 years. The incumbent government, which came to power in 2009, can afford to wait till the later period of its 5-year regime for presenting a populist budget in its bid to woo voters.
From a market perspective, the fuel price hike and the federal government's refusal to roll back fuel prices despite the Opposition parties making an issue of it, clearly shows the government's determination to cut its fiscal deficit.
With the auctions of 3G spectrum and broadband wireless access spectrum facilities fetching around Rs. 106,000 crore for the government, much more than the Rs.35,000 crore budget estimate, the government is now keen on reducing its fiscal deficit to 5.5 percent in 2010-11 before bringing it down to 4.1 percent in the subsequent year.
The comparable fiscal deficit stood at 7.8% in 2008-09 and 6.9% in 2009-10. If the government meets its target, it could be a great achievement especially when considered against the backdrop of the wobbly nature of the global economic recovery.
Besides, higher mop-up in indirect tax collections expected this year owing to higher tax rates and industrial buoyancy and proceeds from divestment in pubic sector undertakings, which is expected to generate Rs.40,000 crore, could reduce government borrowing and help the Reserve Bank of India adopt a more gradual and cautious approach to rate hikes.
The Finance Ministry also seems to be in no hurry to secure additional funds through further withdrawal of the government stimulus, thereby staying focused on sustaining the positive momentum in industrial growth. India's industrial output grew by 17.6 percent from a year earlier in April, the seventh straight monthly rise and the sharpest rise since December 2009, government data showed last month.
Though high inflation is a worry, recent data suggested that food prices are easing due to a statistical phenomenon called the base effect. With the monsoon activity turning out to be near-normal in the past 2-3 days, the government is hoping that food inflation will fall to an acceptable level of 5%-6% in due course.
Wednesday, July 7, 2010
INDIAN ECONOMY AN OVERVIEW
Notwithstanding the uncertainty surrounding the eurozone economies and concerns over faltering economic recovery in the U.S., the Indian economy is poised to grow by double-digits soon. Recently, there have been many positive developments on the domestic front which may augur well for India's trillion-dollar economy.
Last month, the government freed pump prices of petrol from administrative control and increased prices of heavily subsidized kerosene, LPG and diesel, paving the way for more painful reforms in the next 2-3 years. The incumbent government, which came to power in 2009, can afford to wait till the later period of its 5-year regime for presenting a populist budget in its bid to woo voters.
From a market perspective, the fuel price hike and the federal government's refusal to roll back fuel prices despite the Opposition parties making an issue of it, clearly shows the government's determination to cut its fiscal deficit.
With the auctions of 3G spectrum and broadband wireless access spectrum facilities fetching around Rs. 106,000 crore for the government, much more than the Rs.35,000 crore budget estimate, the government is now keen on reducing its fiscal deficit to 5.5 percent in 2010-11 before bringing it down to 4.1 percent in the subsequent year.
The comparable fiscal deficit stood at 7.8% in 2008-09 and 6.9% in 2009-10. If the government meets its target, it could be a great achievement especially when considered against the backdrop of the wobbly nature of the global economic recovery.
Besides, higher mop-up in indirect tax collections expected this year owing to higher tax rates and industrial buoyancy and proceeds from divestment in pubic sector undertakings, which is expected to generate Rs.40,000 crore, could reduce government borrowing and help the Reserve Bank of India adopt a more gradual and cautious approach to rate hikes.
The Finance Ministry also seems to be in no hurry to secure additional funds through further withdrawal of the government stimulus, thereby staying focused on sustaining the positive momentum in industrial growth. India's industrial output grew by 17.6 percent from a year earlier in April, the seventh straight monthly rise and the sharpest rise since December 2009, government data showed last month.
Though high inflation is a worry, recent data suggested that food prices are easing due to a statistical phenomenon called the base effect. With the monsoon activity turning out to be near-normal in the past 2-3 days, the government is hoping that food inflation will fall to an acceptable level of 5%-6% in due course.
Last month, the government freed pump prices of petrol from administrative control and increased prices of heavily subsidized kerosene, LPG and diesel, paving the way for more painful reforms in the next 2-3 years. The incumbent government, which came to power in 2009, can afford to wait till the later period of its 5-year regime for presenting a populist budget in its bid to woo voters.
From a market perspective, the fuel price hike and the federal government's refusal to roll back fuel prices despite the Opposition parties making an issue of it, clearly shows the government's determination to cut its fiscal deficit.
With the auctions of 3G spectrum and broadband wireless access spectrum facilities fetching around Rs. 106,000 crore for the government, much more than the Rs.35,000 crore budget estimate, the government is now keen on reducing its fiscal deficit to 5.5 percent in 2010-11 before bringing it down to 4.1 percent in the subsequent year.
The comparable fiscal deficit stood at 7.8% in 2008-09 and 6.9% in 2009-10. If the government meets its target, it could be a great achievement especially when considered against the backdrop of the wobbly nature of the global economic recovery.
Besides, higher mop-up in indirect tax collections expected this year owing to higher tax rates and industrial buoyancy and proceeds from divestment in pubic sector undertakings, which is expected to generate Rs.40,000 crore, could reduce government borrowing and help the Reserve Bank of India adopt a more gradual and cautious approach to rate hikes.
The Finance Ministry also seems to be in no hurry to secure additional funds through further withdrawal of the government stimulus, thereby staying focused on sustaining the positive momentum in industrial growth. India's industrial output grew by 17.6 percent from a year earlier in April, the seventh straight monthly rise and the sharpest rise since December 2009, government data showed last month.
Though high inflation is a worry, recent data suggested that food prices are easing due to a statistical phenomenon called the base effect. With the monsoon activity turning out to be near-normal in the past 2-3 days, the government is hoping that food inflation will fall to an acceptable level of 5%-6% in due course.
Subscribe to:
Posts (Atom)