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| India's government hopes budget can please voters at home and investors abroad | India's government hopes budget can please voters at home and investors abroad |
| (30 days later) | |
| Trying to rekindle the fire of India's economy, the finance minister, Palaniappan Chidambaram, promised last week to rein in a runaway deficit even as he raised spending on welfare schemes that the government hopes will woo voters in elections scheduled for next year. | Trying to rekindle the fire of India's economy, the finance minister, Palaniappan Chidambaram, promised last week to rein in a runaway deficit even as he raised spending on welfare schemes that the government hopes will woo voters in elections scheduled for next year. |
| In comments that appeared aimed at global investors who have become disenchanted with India's potential as growth has slowed, Chidambaram, presenting the 2013-14 budget, told parliament that "foreign investment is an imperative". Last Thursday's budget ccame at a time of plummeting business confidence in India, rising prices and growing public disapproval of Prime Minister Manmohan Singh's coalition government, which has been besieged by allegations of corruption. | In comments that appeared aimed at global investors who have become disenchanted with India's potential as growth has slowed, Chidambaram, presenting the 2013-14 budget, told parliament that "foreign investment is an imperative". Last Thursday's budget ccame at a time of plummeting business confidence in India, rising prices and growing public disapproval of Prime Minister Manmohan Singh's coalition government, which has been besieged by allegations of corruption. |
| India's economic growth plunged to about 5% for the financial year that ends next month, far from the heady days of 9% growth just three years ago. Chidambaram said he aims to lower the fiscal deficit, which swelled to 5.2% of GDP last year, to 4.8% over the next year and to 3% by 2017. | India's economic growth plunged to about 5% for the financial year that ends next month, far from the heady days of 9% growth just three years ago. Chidambaram said he aims to lower the fiscal deficit, which swelled to 5.2% of GDP last year, to 4.8% over the next year and to 3% by 2017. |
| National elections are scheduled for May 2014, but some analysts say the vote could take place later this year under pressure from coalition allies, who might prefer to cut their losses and face voters sooner. | National elections are scheduled for May 2014, but some analysts say the vote could take place later this year under pressure from coalition allies, who might prefer to cut their losses and face voters sooner. |
| "The finance minister faced two counterveiling pressures: to present a populist, voter-friendly budget and also control the huge fiscal deficit," said Vir Sanghvi, a political analyst. "He is hoping that the economy will improve and prices will come down by the time of the election. That is a big political gamble." | "The finance minister faced two counterveiling pressures: to present a populist, voter-friendly budget and also control the huge fiscal deficit," said Vir Sanghvi, a political analyst. "He is hoping that the economy will improve and prices will come down by the time of the election. That is a big political gamble." |
| Chidambaram promised to increase spending on rural welfare schemes, rural roads and jobs, food guarantees for the poor and women's safety programmes. To boost growth, he also announced special incentives for investment in oil, gas and infrastructure, and pledged to simplify rules for foreign investors who want to enter Indian financial markets. | Chidambaram promised to increase spending on rural welfare schemes, rural roads and jobs, food guarantees for the poor and women's safety programmes. To boost growth, he also announced special incentives for investment in oil, gas and infrastructure, and pledged to simplify rules for foreign investors who want to enter Indian financial markets. |
| Those moves appeared to be attempts to undo the damage done by his predecessor, who imposed controversial tax measures that affected foreign investors adversely. Chidambaram put off the tax measures until 2016. | Those moves appeared to be attempts to undo the damage done by his predecessor, who imposed controversial tax measures that affected foreign investors adversely. Chidambaram put off the tax measures until 2016. |
| In a statement, the US India Business Council "welcomed the clarity now emerging" on the tax front. Ron Somers, president of the council, said Chidambaram "has taken some corrective steps necessary to revitalise investor enthusiasm, spur growth and tame government spending". | In a statement, the US India Business Council "welcomed the clarity now emerging" on the tax front. Ron Somers, president of the council, said Chidambaram "has taken some corrective steps necessary to revitalise investor enthusiasm, spur growth and tame government spending". |
| But there were unpopular measures, too, including a one-year additional tax on individuals and companies earning more than the equivalent of $185,000 annually, and higher customs duties on imported high-end yachts, cars and motorcycles. | But there were unpopular measures, too, including a one-year additional tax on individuals and companies earning more than the equivalent of $185,000 annually, and higher customs duties on imported high-end yachts, cars and motorcycles. |
| "By taxing buyers of luxury products, the government is punching a bag that is capable of taking a few knocks and also sending a message that it is very squarely pro-poor in its policies," said Dilip Cherian, of the corporate communications firm Perfect Relations. | "By taxing buyers of luxury products, the government is punching a bag that is capable of taking a few knocks and also sending a message that it is very squarely pro-poor in its policies," said Dilip Cherian, of the corporate communications firm Perfect Relations. |
| Criticising the budget, the opposition leader, Arun Jaitley, called Chidambaram a "helpless finance minister" who has "very little elbow space" for grand measures. | Criticising the budget, the opposition leader, Arun Jaitley, called Chidambaram a "helpless finance minister" who has "very little elbow space" for grand measures. |
| At a news conference last Thursday, Chidambaram appeared to agree. "There is no scope for largesse. At the same time, there is no scope for imposing burdens on anyone," he said. "The signal to the world and everyone else is that we are now following a fiscally prudent path." | At a news conference last Thursday, Chidambaram appeared to agree. "There is no scope for largesse. At the same time, there is no scope for imposing burdens on anyone," he said. "The signal to the world and everyone else is that we are now following a fiscally prudent path." |
| • This story appeared in the Guardian Weekly, which incorporates material from the Washington Post | • This story appeared in the Guardian Weekly, which incorporates material from the Washington Post |
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