Indian Budget 2010-11: Strapped And Shackled By The Past

[karan.1970]

^^ Not China. Their export oriented model, combined with genuine domestic development of a large, real, credible market for goods has kept them growing in a healthy fashion. They are a global financier, not a borrower, on a net-basis.

I remember reading a recent article on how in China, the debt of local govts and bodies is not included in the public debt figure of 20% and how that will look more like 70% or so if the local governing bodies' debt figures are included. Am not able to place that article though. Any idea where this was reported?

 

[karan.1970]

A further interesting perspective on the issue

Indian Public Debt On Verge of Explosion ??? | Economy Watch

 

[karan.1970]

Another step in the right direction. Will result in Budget deficit to be reduced by over $ 5 billion. In other words, a drop of 0.5% in the budget deficit.

India Cuts Fuel Subsidies Ahead of G20 Meeting - NYTimes.com

MUMBAI, INDIA — The government reduced popular fuel subsidies Friday, a long-delayed change that will help policy makers reduce a big budget deficit but that will also exacerbate already high inflation.

Policy makers said the government would stop subsidizing gasoline, while diesel, kerosene and natural gas would continue to receive support at a slightly lower level. India spent about $5.6 billion to subsidize fuel in the past fiscal year, which ended in March, and state-owned energy companies kicked in an additional $4.4 billion by selling fuel below its cost.

India and other big countries committed to eliminating energy subsidies at a Group of 20 meeting last year, but policy makers here have repeatedly put off the politically difficult change.

Heavily subsidized fuels like kerosene, for instance, are used by many poor Indians for lighting and cooking. Moreover, opposition politicians have criticized the government for not doing enough to bring down escalating prices, especially for food. Consumer prices jumped 14.4 percent in April from a year earlier.

The opposition Communist Party of India (Marxist) called the cuts in fuel subsidies a “cruel blow against the people who are already suffering.”

The G-20 summit meeting in Toronto this weekend might have played into the timing of the decision. But the cut in subsidies also signals that Indian leaders have become more confident about their political mandate a year after they won a new five-year term in office. The Congress Party-led government also appears to have gotten more serious about reducing the federal deficit, which is estimated to be 5.5 percent of the country’s gross domestic product.

Still, policy makers are moving cautiously. Prices for diesel, kerosene and natural gas, which are the most heavily subsidized fuels, will increase only moderately and remain under government control for the time being.

By comparison, gasoline is not subsidized as much, and its retail price is already much higher than in the United States because of high taxes. Prices for it will increase 3.5 rupees a liter, or 29 U.S. cents a gallon, to about 55.70 rupees a liter, or $4.58 a gallon.

The increase in gasoline prices should bolster the profits of state-owned oil companies, which were not being fully compensated by the government for the subsidies. It should also help private energy companies like Reliance and Essar that sharply scaled back their fuel retailing businesses in recent years because they could not compete against the subsidized fuel sold by state-owned

Even after the increase, analysts at Citigroup estimate that the government and state-owned oil companies will spend about $11.5 billion on fuel subsidies this fiscal year, down from a previous estimate of $16.7 billion.

Reliance Natural Resources, owned by Anil Ambani, revised a purchase agreement for natural gas with Reliance Industries Friday, Bloomberg News reported from New Delhi.

 

[Ammyy]

Also, Every time some Indian posts some economic thread it get deleted.

And according to SUPER MODERATORS "AgNoStIc MuSliM"

Thread related to India and China's economy are not allowed in this forum.

Yes you are right..mod delete all threads related to 3G auction cause Indian economy threads are not allowed .... but may be this is out of this criteria cause its Against India or Anti- Indian thread

 

[Jade]

^^ Not China. Their export oriented model, combined with genuine domestic development of a large, real, credible market for goods has kept them growing in a healthy fashion. They are a global financier, not a borrower, on a net-basis.

It indeed is surprising that people think imports are bad and exports are good. Nothing can be farther from the truth. As Bastiat wrote, "Consumption is the end, the final cause, of all economic phenomena, and it is consequently in consumption that their ultimate and definitive justification is to be found". Exports are the goods and services that we produce but do not consume and hence they lower our welfare. Imports on the other hand improve our welfare. As the renounced International economist Carbaugh wrote Exports are nothing but a means of financing Imports.

 

[Hutchroy]

A further interesting perspective on the issue

Indian Public Debt On Verge of Explosion ??? | Economy Watch

From the above Article :

DC: Ok, but in that case, why aren’t we hearing all sorts of noise about potential horror stories as we are with Greece, which also has a level of debt almost equal to its GDP ??? Is it because the government of India was too smart to get involved with Goldman Sachs [snickers] ???

DR: Hahahaha, no, it has nothing to do with your favorite whipping boys GS, who are actually quite smart and bullish when it comes to India, but the fact that, UN-like Greece, which owes about 80% of its debt to foreigners, whether public or private, about 90% of India’s debt is owed to its own people and corporations. This means India doesn’t have to worry about being “foreclosed,” to use the language of your sub-prime crisis [laughs], but it DOES have to worry about how to keep operating on a day to day basis.

That, Karan Sir, is the Difference!

 

[Hutchroy]

One has to wait and see if the "may" becomes a "has".

There are a large number of estimates on Indian budget deficits, but in the recent past the trend has actually been toward higher actual deficits than targets.

Good luck to India on this front...

Capital suggestion

Good news, bad news

Dr Farrukh Saleem

In short, our current public debt scenario isn't all that bad. Pakistan's public debt at 55 per cent of GDP actually compares favourably with India's 58 per cent of GDP and Sri Lanka's 78 per cent of GDP. At the other end of the spectrum are countries like Russia at 6.8 per cent of GDP, Hong Kong at 14.5 per cent and China at 15 per cent. So we have both good as well as bad news but the problem is that 'good news crawls on its belly while bad news has wings'.

Further Reading :

Pakistan’s Domestic Debt (Outstanding) (In Billions Rs.)

End May 2010 : 4,633.6 @ 85 = US$ 54.51

Pakistan's External Debt and Liabilities

31-03-2010 : US$ 54.235 Billion

So Pakistan’s Total Debt = US$ 108.745 Billion.

Pakistan’s GDP from Pakistan Economic Survey 2009-2010

Growth and Investment : Table 1.5

At Market Prices for 2009-2010 = 14,668.428 @ 83.5 = about US$ 176 Billion.

As such Pakistan’s Debt to GDP Ratio is about 61.8 Per Cent.

Of course these are figures for May and Marh.

Will have a final and correct Figure(s) once the End June figures for both Domestic and Foreign Debts are available.

 

[karan.1970]

From the above Article :

DC: Ok, but in that case, why aren’t we hearing all sorts of noise about potential horror stories as we are with Greece, which also has a level of debt almost equal to its GDP ??? Is it because the government of India was too smart to get involved with Goldman Sachs [snickers] ???

DR: Hahahaha, no, it has nothing to do with your favorite whipping boys GS, who are actually quite smart and bullish when it comes to India, but the fact that, UN-like Greece, which owes about 80% of its debt to foreigners, whether public or private, about 90% of India’s debt is owed to its own people and corporations. This means India doesn’t have to worry about being “foreclosed,” to use the language of your sub-prime crisis [laughs], but it DOES have to worry about how to keep operating on a day to day basis.

That, Karan Sir, is the Difference!

Exactly.. Thats why I called it a different perspective...Its our own citizens who are financing our growth. Unlike the existing (prospective) defaulters where most of the loan is external.

Also India's forex reserves are in excess of India's external liabilities. So no chances of default.

The only place we are getting hit because of the deficit and public debt is the higher interest that we have to pay. However with Moody's and S&P rating hitting the investment grade, that should give some relief..

 

[Hutchroy]

Pakistan’s debt-to-GDP ratio to cross 61 percent

Breaches Fiscal Responsibility & Debt Limitation Act limit of 60 percent

Sunday, June 27, 2010
By Javed Mirza

KARACHI: Pakistan’s total debt-to-GDP ratio has crossed 61 percent this fiscal year, breaching the 60 percent limit set under the Fiscal Responsibility and Debt Limitation Act, the central bank said.

The country’s external debt-to-GDP ratio has hit 30 percent, while domestic debt-to-GDP ratio has mounted to an alarming level of 31 percent, the State Bank of Pakistan reported in its official website.

Despite better performance on the external front, domestic public debt remains on the rise, up by 20 percent during the 11 months of the fiscal year.

Pakistan has been facing the burden of mounting debt pressure. The same stems from escalating fiscal deficit of the country as compared to the budgetary estimates. During FY10, the fiscal deficit rose to 5.2 percent of the GDP against the budgeted 4.7 percent. The domestic side remained a prominent source of financing fiscal deficit.

In between, a differentiating factor came in the form of the International Monetary Fund’s (IMF) budgetary support under its augmented funding plan for Pakistan.

The contribution of the IMF funding in the overall external financing of the country has risen. The IMF’s total share in external debt has risen from four percent in FY06 to 14 percent till the third quarter of FY10.

Contribution of public debt under total external debt dropped to 82 percent from 91 percent in FY06.

The disbursements under the IMF programme are expected to conclude in FY11, but it remains to be seen whether the government will seek further budgetary support from the global donor during FY11 in case additional inflows from sources such as the United States under the Kerry-Lugar and Tokyo pledges fail to materialise on time.

Even though the IMF programme contributed towards bringing stability, favourable external factors also played a major role.

The country’s current account deficit has shown substantial improvement as it dropped by 66 percent during the first 11 months of the current year. Credit should be given to better export performance, which registered a growth of three percent during the period.

However, the real savior was in fact the recessionary condition in the global markets, which kept commodity prices, especially oil under stress. The result is evident as imports registered a decline of 3.5 percent.

Another commendable aspect is record level of remittances, which is set to reach $8.8 billion in FY10, thereby, providing desirable support to the overall balance of payments in the absence of foreign direct investment (FDI).

Despite better performance on the external front, domestic public debt is still on the rise.

“Overall public debt, thereby, remains a strong source of vulnerability to the economy and mounting domestic debt is also strongly suggesting an interest rate rise in the offing,” said Farhan Bashir Khan, an economist at InvestCap Securities.

 

[Spitfighter]

So does this mean we can post stuff about the Indian economy again?

 

[karan.1970]

So does this mean we can post stuff about the Indian economy again?

I guess negative news will be more acceptable...Unlike the ones about 3G / Reliance reconciliation etc...