India’s rebound in growth provides a rare sign of vitality among the world’s largest economies. But, even with inflation falling and industrial activity gradually recovering, Prime Minister Narendra Modi faces a further awkward challenge as he tries to bolster his country’s prospects: balancing the government’s books.
Optimism over India was underlined last week when the OECD said it would be the only major global economy to enjoy “a pick-up in growth momentum” this year. Yet while Mr Modi’s long-anticipated programme of economic reforms has pushed financial markets to record highs over recent weeks, his government’s attempts to curb spending have often seemed less sure-footed.
A drive to offload stakes in state-owned businesses is crucial to achieving India’s main goal of cutting the fiscal deficit to 4.1 per cent of gross domestic product by March 2015. That effort kicks off in earnest this week, with investor roadshows in Singapore and other global financial centres aiming to sell 5 per cent of state-backed energy explorer Oil and Natural Gas Corporation. If all goes to plan, the sale should bring in about $3bn in early December.
Falls in global oil prices allowed Mr Modi to raise excise duties on petrol and diesel last week, bringing in more taxes without alienating consumers by higher fuel prices. Lower oil costs will also help to lower bloated fuel subsidy bills, taking India a step further towards its fiscal ambitions. >> Read More