Could this ease the pressure on govt. finances?
In this issue:
» RBI proposes rate cuts
» Why should LIC come to the rescue of Air India?
» Gold prices could see a pullback
» TRAI proposes single licensing regime
» ...and more!
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As the Economist points out, things worsened in 2004, when state debt soared to 33% of GDP prompting the central bank to press for some reforms. There seems to have been some progress. For starters, state debt has come down to 22% of GDP. The central government also restructured some debt owed to it by the states and made these handouts based on certain parameters. All states have now agreed to balance their books by 2015. What is more, the states' deficit is expected to fall to 2.2% of GDP in FY12, from a peak of almost 5% a decade ago. This is in sharp contrast to the centre, whose deficit has only bloated and is struggling to put this in order. Infact, it came under a lot of flak for not adequately addressing this issue in the recent Budget as it pegged its deficit at 5.9% of GDP.
Of course, some grey areas still remain for state governments. These are losses at state owned electricity firms, how the goods and sales tax will pan out if it is implemented, the impact of a slowing economy and the like. But it goes without saying that if state governments continue to spruce up their act and depend less on handouts from the centre, some pressure on the central government could ease off. The centre on its part would also be required to be more proactive and appraise the performances of state governments, offering sops accordingly. For starters, governments of under-performing states like West Bengal, UP etc should be brought to book. Of course, it will not let the centre completely off the hook as bigger issues of subsidies and rising non developmental expenditure remain. But it could be one less headache for the central government to deal with.
Do you think that Indian states standing on their own feet will take a lot of pressure off the central government? Share your comments with us or post your views on our Facebook page / Google+ page.
01:36 | Chart of the day | |
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* in 2010 Data Source: The Econ0mist |
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But what about the longer term? Well, Rogers continues to be bullish on gold's long term prospects. Thus, a pullback of the order of 30%-40% should be seen as an opportunity to accumulate more gold rather than get out of it.
It should be noted that the previous gold bull run of the 70s witnessed a pull back of the order of 50% before another 8-fold jump over the next few years. Since the paper currency problems of the world are far from over, there is every chance that history could repeat itself. Thus, making gold a small part of one's portfolio especially in the current pullback, could certainly yield great results over the long term.
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While the move is appreciated we believe that it has come in a little too late. The Indian telecom market is already overcrowded with 13-14 operators. Hence, the chances of new players entering the market appear remote. Secondly, 2G scam has eroded the business confidence in the sector. Thus, new companies might be reluctant to enter the telecom space. Nonetheless, we believe that the move towards single pan-India licence is a step in the right direction. Better be late than never.
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04:56 | Today's Investing mantra |
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1 Responses to "Could this ease the pressure on govt. finances?"
Arun Draviam
Apr 17, 2012Till such time the government does away with permanent jobs in a life that is temporary, fiscal deficit and inflation- the manifestations of inefficiency and appeasement- will continue to bleed any economy. Barring defence services, where every person should be compulsorily retired after certain age, so as to leave the service fighting fit, every other job in the Government and PSU/PSE should be temporary.