Five point something: Chidambarams dilemma

Analysts suggest maintaining fiscal deficit at 5.3% will be a challenge for the finance minister.
  • Language
  • App
  • Subscriptions
  • Specials
  • Sign-In
  • Register
GeStepAhead Realasset
moneycontrol.com

Home » News » Economy

Feb 25, 2013, 08.28 AM | Source: Moneycontrol.com

Five point something: Chidambaram's dilemma

Analysts suggest maintaining fiscal deficit at 5.3% will be a challenge for the finance minister.

Like this story, share it with millions of investors on M3

Five point something: Chidambarams dilemma

Analysts suggest maintaining fiscal deficit at 5.3% will be a challenge for the finance minister.

Post Your Comments

Share Cancel

Moneycontrol Bureau

Not everything is hunky-dory as India's finance minister P Chidambaram readies for the UPA's final Budget in this term. His financial wizadry in crafting the fiscal consolidation roadmap will be widely watched by his national and international audience. 

Analysts suggest maintaining fiscal deficit at 5.3 percent will be a challenge for the finance minister. In his roadshows, finance minister P Chidambaram had gallantly said: "Watch the upcoming Budget closely: it will prove that we mean business. Under no circumstance will I agree to a breach of the fiscal deficit target of 5.3 percent of GDP," This view was bolstered after the government cancelled its last FY13 bond auction and is said to have an estimated cash surplus of Rs 90,000 crore.

Food subsidy Bill: A threat to FM's 5.3 percent deficit maintenance?

Economists were initially working with a deficit figure of 5.5-5.8 percent which was much higher than the government's estimate of 5.1 percent (which was later revised up to 5.3 percent). But reports suggest that few millions more will have to inducted in the proposed National Food Security Bill (NFSB), reportedly a pet issue of Congress boss Sonia Gandhi, is a direct threat to the finance minister's efforts to put the fiscal accounts in order.

The talk is that providing cheap grain to nearly 70 percent of India's population could increase the country’s subsidy bill for fiscal 2014 to Rs 1.2 lakh crore, which would include an additional Rs 45,000-Rs 50,000 crore under NFSB. In fiscal 2013 itslef, the actual spend is said to have exceeded the budgeted Rs 75,000 crore. The question, and by extension fear, now is that the figure can very well be go above Rs 1.2 lakh crore.

The bill, if passed, will come at a time when the Indian population was hit by spiralling prices of basic goods such as rice and wheat.

Ashok Gulati, chairman, Commission for Agricultural Costs and Prices told CNBC-TV18 that if rice is offered at Rs 3/kg and wheat at Rs 2/kg, along with a greater inclusion of population, "then I do not think there is any escape (from escalting cost)." (Catch full interview here)

He calculated that the real cost will be much higher because it involves spending on infrastructure. Grains would have to be moved from one state to another and railways are choked; so fresh investments have to be made in railways, in stocking facilities and in the basics of logistics.

Below-consensus December IIP number, high trade deficit and a downward revision of GDP growth projection have been a talking point of economists and market pundits. News like record FII inflows and January WPI registering a 3-year low of 6.6 percent had done little to lift public mood. Will the need for social safety net then strain the current fiscal situation? We will know by next week.

Ads by Google

Buy, Hold, Sell ? Hear it first on M3
Five point something: Chidambarams dilemma

See all

Get started using your favorite social network

or

Login using moneycontrol ID

Username
Password

Need help logging in? Reset password.

Don´t have an account? Sign Up

Get started using your favorite social network

or

Simply sign up using this short form

* mandatory

UserName*

Username should be atleast 4 character

Password*

Password should be 8 or more characters,
atleast 1 number, 1 symbol & 1 upper case letter

Alert

Your Password should contain
  • 8 or more characters
  • At least 1 number
  • At least 1 symbol
  • At least 1 upper case letter
Confirm Password*
Email
Already have an account? Login