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The Big Picture – The New Economic Roadmap

Summary:

In the upcoming budget, the Finance Minister is expected to announce subsidy cuts while allocating more for infrastructure. The government is willing reduce subsidies, estimated at around 2% of GDP, and transfer funds to other sectors.

Falling oil prices have reduced the fuel subsidy bill and the government has roughly halved expenditure growth this fiscal year.

The government is willing to bring down its borrowing to less than 3% of the GDP.

The government is scrambling to contain the fiscal deficit at 4.1% of GDP in the fiscal year ending March, after a sharp shortfall in revenue that forced it to rein in spending.

India’s fiscal deficit touched 5.25 trillion rupees, or 99% of the full year’s deficit target, in November.

India’s economy is recovering from its longest slowdown since the 1980s, but demand and investments remain weak.

There is a lot of hope from the new government and having received sufficient time to settle in at centre, the hope for 2015 budget is going to be very high in terms of not only focus on achieving fiscal deficit target but also being path breaking in terms of some of the key expenditure reforms and clearance of GST and insurance bill.

Analysts are of the view that the landscape for the Indian business environment looks extremely attractive with a business-pro government, depreciating oil prices, improving fiscal deficit and declining inflation.

The government might have a tough time ahead. Fiscal consolidation remains the key domestic risk. Globally a bounce back of oil prices, rise in US rates and an EU crisis driven would be the primary risks.

Experts say that the challenges and difficulties faced by technology start-ups need to be addressed by the government in the upcoming Union Budget 2015 if it wants to make its flagship initiatives like Make in India and Digital India campaigns more successful.