9 Jan 2015

Strong fundamentals

Economic data has steadily improved, especially in the second half-year. Meanwhile, the government has enjoyed a gift that keeps on giving, in the form of the falling price of energy, the largest component of India’s trade deficit. This is helping to reinforce India’s external reserve position, which was already moving towards an all-time peak thanks to the management skills of the governor of the Reserve bank, in position since the second half of 2013. It has also provided cover for the NDA government to eliminate key fuel subsidies which have for years been a drag on the country’s fiscal balance. It further allowed them to boost fiscal revenue by increasing duty on petrol and diesel, twice. Finally, a programme of disinvestment of government holdings in public sector enterprises was kicked off in December so Finance Minister Jaitley can look forward to presenting a new budget in the first quarter based on a strong financial footing.

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