The Economist writes in the week that the Indian budget was presented by Finance Minister P Chidambaram:
Rapid growth, underpinned by a savings rate of 29% of GDP and an investment rate of 30%, has been a great help to government finances. His budget was able to include big spending increases and a return to fiscal prudence. Last year, mindful of promises to spend more on relieving poverty and on health, education and infrastructure, Mr Chidambaram suspended efforts towards fiscal correction, though the outcome was not as bad as he feared. The central government’s deficit rose only fractionally, to 4.1% of GDP.
Mr Chidambaram urged parliament to reach consensus so that subsidies can be directed at the truly needy. But in a year when there are elections in a number of states, this will not happen. And, while its finances remain strapped, the government will find it hard to plug India’s infrastructure deficitin roads, ports and above all electricity. Nor will it be able to deliver the improvements it so badly needs in health and education.