Bourbon finance

29 February 2008 By Martin Hutchinson

Indian public spending in 2007 was up 24%, with another 18% rise expected this year. Food, oil and fertilizer subsidies push up spending, worsening India’s trade deficit and distorting the economy. If world financial markets get tight, India is headed for big trouble.

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The Indian budget for the year to March 2009, announced February 29, increased public spending to Rs.6.58 trillion ($164bn), an increase of 18% over the Rs.5.57tr of 20078. Public spending in 200708 increased by 10% over the level in the February 2007 budget, and 24% over 200607.

The budget included a $13bn loan scheme to small farmers, subsidies on food, oil and fertiliser, a 20% increase in education spending and a 15% increase in health spending.

The government expects economic growth of 8.7% for the year to March 31, 2008, down from 9.6% the previous year. Wholesale price inflation was 4.4% in the year to February 2008, but that figure is dampened by oil and food subsidies.

Imports in the nine months to December 2007 were $169bn and exports $111bn, up 26% and 22% respectively from the previous year. The trade deficit of $57bn was up from $42bn in the previous year.

Context News

The budget included a $13bn loan scheme to small farmers, subsidies on food, oil and fertiliser, a 20% increase in education spending and a 15% increase in health spending.

Imports in the nine months to December 2007 were $169bn and exports $111bn, up 26% and 22% respectively from the previous year. The trade deficit of $57bn was up from $42bn in the previous year.

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