Sunday, 1 March 2015


Macro Fundamental of the Budget-2015-16

It is claimed that the Indian budget has emphasized the macro fundamentals but it is not the full story. India’s savings and Investment rates are both declining. In 2011-12,saving rate was 33% of GDP which was reduced to 31.1% in 2012-13 and to 30% in 2013-14 respectively. On the contrary, Gross fixed capital formation was 33.6% of GDP in 2011-12 which was declined to 31.9% in 2012-13,30.7% in 2013-14 and 29.8% in 2014-15 respectively.So,there saving investment gap which is volatile.India’s fiscal deficit as % of GDP was 6.68% in 2009-10,4.80% in 2010-11,5.75% in 2011-12, 4.82% in 2012-13, 5.41% in 2013-14 and 4.13% in 2014-15 respectively and the Government targets to achieve 3.6% in 2017 and 3% in 2018 respectively which are too much ambitious.Therefore India’s fiscal balance is also volatile and uncontrolled.Lastly India’s external balance is widening in case of trade balance but current account balance as % of GDP was -2.8% in 2010-11, -2.7% in 2011-12, -4.7% in 2012-13 and -1.7% in 2013-14 respectively which was marginally improved at present. Moreover, the growth rates of exports and imports became negative in 200-10and 2012-13 respectively  and growth of imports always exceeds exports and in real terms negative capital account balance is increasing. This is fundamental deficit in external sector in India. Thus in a macro economic sense, India is facing disequilibrium and is growing instability  while price stability or war on inflation is continuing. Although India’s growth of GDP is rising slowly except in the crisis period but the share of agriculture is falling steadily  and growth of industry is stagnant or slowing down. In this circumstances, this budget is crucial in the sense that it can boost in capital market too and a scope of new investment in social and infrastructure sectors too.But the domestic demand and supply in various sectors will mismatch. However, until and unless the fundamental disequilibrium is removed the sustainable development in India is doubtful.     

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