India’s Budget Deficit
By: Shaikha Al Falasi April 16th, 2019.
The Indian economy proved resilient during the global financial crisis, partly as a result of aggressive measures to boost government expenditures and cut taxes. Deficit reduction poses a big challenge but also provides an opportunity to reorder spending priorities in a way that will support future growth. General government debt now stands at 82% of GDP according to International Monetary Fund estimates, up three percentage points from two years ago. High levels of deficits and debt increase the vulnerability of public finances. The first thing that must happen is to bring the deficit down to a moderate level and seeing the public debt go downward to help the progress towards long-term objectives. On the expenditure side, there are a number of inefficient subsidies that cost a lot of money and do not serve their intended purpose. For instance, fuel subsidies supposedly help the poor but most of the benefits, in fact, go to middle- and high-income households. These subsidies are costly and perpetuate a high level of dependence on fuel imports. The measures in this year’s budget will be about far more than just mundane matters such as taxes and government expenditures. They have the potential to determine India’s growth prospects for many years to come.
