Budget 2012: What experts make of the subsidy announcements
Finance Minister Pranab Mukherjee proposed trimming the government's subsidy burden and called for speeding the pace of economic reforms, which have been stalled by political gridlock, in his budget speech on Friday.
COMMENTARY:
ABHEEK BARUA, CHIEF ECONOMIST, HDFC BANK, NEW DELHI
"What has effectively happened is that a large share of the fiscal deficit, which is above 80%, is to be funded through the market borrowing. I think the 10-year yield will cross 8.40%, and will move to 8.50%, given that the borrowing is larger than what was estimated."
BACKGROUND:
- The budget comes against the back of low expectations, with the ruling party, battered in recent state polls and hamstrung by slowing economic growth and high global oil prices, in no position to advance bold economic reforms that could unclog flagging growth in Asia's third-largest economy.
- The central bank left interest rates on hold on Thursday and warned of resurgent inflation risks, putting pressure on the government to trim the fiscal deficit.
- Inflation picked up for the first time in five months to 6.95% in February, although the number remains below the central bank's -March projection of 7%.
- Production at factories, mines and utilities in January expanded 6.8% from a year earlier, the highest since June 2011 and from market estimate of 2.1%.
- But growth in Asia's third largest economy fell to 6.1% in the quarter ed December, the weakest pace in almost three years, data released in February showed.
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