@Mad Indian
Like I mentioned, there is a long long way before we even get close to the situation in Greece and other EU countries. And among other things, even the trend lines don't match. Our debt-to-GDP ratio is going down not up. Our GDP is expanding not contracting and so on.
The graph that you had were percentages of expenditure not percentage of GDP. Since % of GDP gives better idea with respect to the size of the economy, it makes better sense to use that. Our subsidies cost around 40-42 Billion USD last year and we speant around 13 Billion USD on actual welfare like Health and Education. So around roughly 55 billion USD of 1.6 trillion USD economy is 3.5% of GDP.
And again on taxes and revenue, I mentioned that the GoI has been given massive tax cuts for a number of years now particularly as part of the GFC stimulus package. The revenue foregone only for FY 11 was around 30 Billion USD, much less than say the MNREGA's 6 billion USD. And infact this had come down from last years' 8Billion USD earmarked for NREGA. The large tax sops to exporters and industry over the years adds to the fiscal deficit just like spending does.
Right now, deficit is not something we should be worrying about. Its growth. In a downturn, the govt. SHOULD be running a deficit to increase demand and jumpstart the economy. When the economy does well, the govt. should remove itself from the economic scene and balance its book and pair down its debt.
The slowdown has multiple factors and its not all because of the global slowdown but it is still an important part of it. Very briefly IMO I would put it on
(1) Slow pace of reforms either because of coaltion politics or internally divided Congress (Add DTC, GST, fuel price rationalising, subsidies, FDI in multibrand retail and aviation, new company bill e.t.c.)
(2) Very agressive monetary policy by RBI which has hiked Interest rates to very high levels. This directly affects investment.
(3) EU slowdown and lack of liqudity in global markets where investors were eager to invest in emerging markets.
(4) Very high oil prices where we had oil around 126 dollar a barrel compared to say 10 or even 5 years ago. We get a double whammy because the cost arn't passed on to consumers but borne by the govt. in the form of subsidies which directly impacts govt. finances.
Like I mentioned, there is a long long way before we even get close to the situation in Greece and other EU countries. And among other things, even the trend lines don't match. Our debt-to-GDP ratio is going down not up. Our GDP is expanding not contracting and so on.
The graph that you had were percentages of expenditure not percentage of GDP. Since % of GDP gives better idea with respect to the size of the economy, it makes better sense to use that. Our subsidies cost around 40-42 Billion USD last year and we speant around 13 Billion USD on actual welfare like Health and Education. So around roughly 55 billion USD of 1.6 trillion USD economy is 3.5% of GDP.
And again on taxes and revenue, I mentioned that the GoI has been given massive tax cuts for a number of years now particularly as part of the GFC stimulus package. The revenue foregone only for FY 11 was around 30 Billion USD, much less than say the MNREGA's 6 billion USD. And infact this had come down from last years' 8Billion USD earmarked for NREGA. The large tax sops to exporters and industry over the years adds to the fiscal deficit just like spending does.
Right now, deficit is not something we should be worrying about. Its growth. In a downturn, the govt. SHOULD be running a deficit to increase demand and jumpstart the economy. When the economy does well, the govt. should remove itself from the economic scene and balance its book and pair down its debt.
The slowdown has multiple factors and its not all because of the global slowdown but it is still an important part of it. Very briefly IMO I would put it on
(1) Slow pace of reforms either because of coaltion politics or internally divided Congress (Add DTC, GST, fuel price rationalising, subsidies, FDI in multibrand retail and aviation, new company bill e.t.c.)
(2) Very agressive monetary policy by RBI which has hiked Interest rates to very high levels. This directly affects investment.
(3) EU slowdown and lack of liqudity in global markets where investors were eager to invest in emerging markets.
(4) Very high oil prices where we had oil around 126 dollar a barrel compared to say 10 or even 5 years ago. We get a double whammy because the cost arn't passed on to consumers but borne by the govt. in the form of subsidies which directly impacts govt. finances.