India FinMin Says Extra Time Needed to Fix Subsidies

After delivering India’s budget on Thursday, which fell short on concrete measures to rein in the ballooning subsidy bill, Finance Minister Arun Jaitley said he needs more time to develop a plan to overhaul the system.

“For 66, 67 years, India has not been able to find an answer to subsidies, [and] they expected me to find it in 45 days,” Jaitley said in an interview with CNBC-TV 18.

“We’ve just taken over so the [credit] rating agencies should also appreciate that these are areas in which we will require some more time to move,” he said.

In his budget speech, Jaitley said the government will set up an Expenditure Management Commission to overlook the subsidy program. He also said there are plans to make food and petroleum subsidies “better targeted”. However, he did not provide details on how that would be achieved or the savings it would bring.

Subsidy expenditures have strained government finances in the recent years, particularly given sluggish economic growth. The economy expanded 4.7 percent in the fiscal year that ended March 31, the second straight year of sub-5 percent growth.

Spending on food, fuel and fertilizer subsidies has increased significantly over the past decade, rising to 16 percent of India’s total budget in the year ended March 2014, up from 9 percent in 2004.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza