Former Prime Minister Manmohan Singh today said the budget reflected lot of “good intentions” of the NDA government but it lacked any clear roadmap to achieve the goals.
Describing the budget as disappointing, Singh, who is credited with ushering in economic reforms as Finance Minister in the Narasimha Rao government in 1991, said the Modi dispensation did not lay out any framework to implement various initiatives announced in the budget.
“My worry about the budget is that it has good intentions but it does not have an adequate roadmap and framework to implement the inititiaves,” the former Prime Minister said.
He said though lot of funds have been established there was no concrete direction to convert them to solid action plan.
Singh was also critical of the government over “inadequate” fund allocation to various welfare measures for rural areas of the country and poor people.
70 per cent of the people in the country live in rural areas. There was not much attention to them, he said.
The new government in Iran has withdrawn all crucial oil and gas concessions that had been promised to India by its predecessor.
Oil minister Bijan N Zangeneh, it is learnt, told Indian ambassador D P Srivastava on September 1 that Tehran would not accept the entire payment for crude oil imported by India in rupees as agreed in July.
India was banking on 100 per cent rupee payment for Iranian crude to cut its forex outflow. Petroleum Minister M Veerappa Moily had assured Prime Minister Manmohan Singh last month that an additional 11 million tonnes would be imported from Iran in 2013-14 to save $ 8.47 billion.
Iran has since stopped issuing invoices in rupees for the full quantity of crude and reverted to the old system of accepting only 45 per cent of the payment in rupees.
Alleges oil minister of delaying $1.8 bn penalty on RIL in a letter to PM
Firing a fresh salvo against petroleum minister M Veerappa Moily, CPI leader Gurudas Dasgupta has written a letter to Prime Minister Manmohan Singh asking his immediate intervention in the matter of imposing $1.8-billion penalty on Reliance Industries Ltd (RIL), alleging that Moily is acting in favour of the Mukesh Ambani-led company.
Dasgupta, who has been raising voice repeatedly against the alleged functioning by Moily in favour of RIL, said despite the proposal by the Directorate General of Hydrocarbons (DGH) getting a nod from oil secretary and joint secretary (exploration), the minister has over-ruled it.
Moily recommended that the matter be again referred to the Solicitor General (SG) and the law ministry for clarification, before the notice for the year 2012-13 was issued.
Strong data from India on Thursday and a recent recovery in the rupee makes it tempting to conclude that the worst for India’s current crisis is in the past.
The rupee is up 8 per cent from its record low last month, and the new data showed inflation cooling and industrial production rebounding. But don’t get too excited, says economist Sonal Varma at Nomura.
Ms Varma says Thursday’s unexpected 2.6 per cent gain in July industrial output was led by volatile components that are likely to reverse, while consumer price inflation only moderated to a still-elevated 9.5 per cent.
Far from seeing recovery, Ms Varma worries about the spectre of stagflation – the ugly combination of low growth and inflation – on the short-term horizon.
Financial conditions have tightened significantly since July, which should hurt investment demand. Growth over the past four months has been buttressed by greater government spending, which cannot continue against the backdrop of slowing revenue growth. A combination of high interest rates, high inflation and weak income growth should also hurt private consumption demand.
Nomura anticipates India’s GDP will fall to 4.2 per cent in the fiscal year ending March 2014 — almost half the decade-average of 8 per cent.
Continuing his exposés on the “KG Basin loot”, veteran CPI leader Gurudas Dasgupta on Monday accused Petroleum Minister Veerappa Moily of citing “geological uncertainty” as a reason for shortfall of production of natural gas by Mukesh Ambani-headed Reliance Industries Limited (RIL).
In a letter to the PM Manmohan Singh, he alleged that Moily’s move was to dole out the new price to RIL, which was objected by finance and petroleum ministries.
“It has appeared in the Press that Petroleum Ministry has revised its earlier stand and has now circulated a Cabinet note to effect that RIL shouldn’t get revised price on gas till the reasons for the fall in output are ascertained. It is further learnt that the Petroleum Ministry has proposed that if it reaches the conclusion that the fall was due to geological difficulties, then they would be allowed the benefit of the price increase to RIL.
“The formulation of Cabinet note in this fashion has exposed duplicity of Petroleum Minister,” said Dasgupta, pointing out that Petroleum Ministry officials and the regulator had consistently taken a stand blaming RIL for shortfall in the mandated production and issued notice for fine of one billion dollar.
“It is going to happen in a matter of days rather than weeks, Brazil and India can start the move,” said Dipak Dasgupta, a top Indian official.
Mr Dasgputa told Reuters that China, Brazil, India, Turkey, Russia and South Africa have all been squeezed as the US Federal Reserve prepares to tighten monetary policy. Joint action would give emerging markets greater firepower, allowing them to deploy their combined $8.7 trillion (£5.6 trillion) of reserves and crush “speculators”, rather than being picked off one by one.
However, it is unclear whether such action would serve any useful purpose if the real problem is exhaustion of catch-up growth models in these countries, and boom-bust credit cycles. “This could backfire,” said Ian Stannard, of Morgan Stanley. “If they did this, they would have to sell US and European bonds and that would push up yields. It was rising yields that started this process in the first place.”
The side-effect of such intervention would be monetary tightening, pushing countries into deeper trouble. India’s growth fell to 4.4pc in the second quarter, the lowest since the post-Lehman crisis in 2009. This is eroding tax revenues and pushing the budget deficit back over 5pc of GDP, with a ratings downgrade looming.
India is suffering from a spate of economic ills: too much state control in the government, too much inflation, too high deficits, and so forth.
And it may be on the verge of making things worse.
India’s lower house of parliament just passed a food bill that will give subsidized grain to 2/3rds of the country’s citizens. The aim of the bill, which is supported by Prime Minister Manmohan Singh, is to reduce hunger. But economists are saying things might backfire.
In a note to clients this morning, Nomura says the law (if it goes all the way through) will be problematic for several reasons.
IN MAY America’s Federal Reserve hinted that it would soon start to reduce its vast purchases of Treasury bonds. As global investors adjusted to a world without ultra-cheap money, there has been a great sucking of funds from emerging markets. Currencies and shares have tumbled, from Brazil to Indonesia, but one country has been particularly badly hit.
Not so long ago India was celebrated as an economic miracle. In 2008 Manmohan Singh, the prime minister, said growth of 8-9% was India’s new cruising speed. He even predicted the end of the “chronic poverty, ignorance and disease, which has been the fate of millions of our countrymen for centuries”. Today he admits the outlook is difficult. The rupee has tumbled by 13% in three months. The stockmarket is down by a quarter in dollar terms. Borrowing rates are at levels last seen after Lehman Brothers’ demise. Bank shares have sunk.
On August 14th jumpy officials tightened capital controls in an attempt to stop locals taking money out of the country (see “India in trouble: The reckoning”). That scared foreign investors, who worry that India may freeze their funds too. The risk now is of a credit crunch and a self-fulfilling panic that pushes the rupee down much further, fuelling inflation. Policymakers recognise that the country is in its tightest spot since the balance-of-payments crisis of 1991.