The weekly recap: 16th-20th Feb

The weekly recap: 16th-20th Feb
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First Published: Fri, Feb 20 2009. 09 11 PM IST

Updated: Fri, Feb 20 2009. 09 11 PM IST
New Delhi: Acting finance minister Pranab Mukherjee stuck to the rulebook and presented a matter of fact interim budget 2009. He avoided the temptation to announce pre-election sops or a stimulus package and also didn’t touch taxes. Many said it was a wasted opportunity. But Mukherjee said he did not have the mandate to go any further. Perhaps indicating that after falling out with the Samajwadi Party, the UPA had to tread cautiously to get Parliament’s approval for its vote-on-account. He also warned of tough times ahead.
A slippage in fiscal discipline was expected, but what
shocked everyone was the sea of red ink lashing the Indian economy. Mukerjee said fiscal deficit was expected to touch 6 per cent of the GDP — the highest in seven years, because of falling tax collections and rising expenditure. For the next fiscal, the deficit is expected to be 5.5 % of GDP – still much higher than the 3% of GDP stipulated in the Fiscal Responsibility and Budgetary Management Act.
The Opposition has raised the ante and questioned the UPA’s commitment to the common man.
Industry was also disappointed that the government did not bail out certain sectors. But for the record it said the finance minister’s compulsions were understandable.
And the confusion over the new FDI norms announced by the government last week continued this week. Mint reported that the changes would reclassify many Indian-owned companies as foreign-owned ones.
The government finally gave its nod for the sale of the tainted IT Company Satyam through an open competitive bidding process. L&T, Tech Mahindra, B.K.Modi’s Spice Group and the Hinduja Group have already expressed interest in buying stakes in the firm. The company law board has permitted the Satyam board to preferentially allot shares of at least 26% of its equity.
And while pink slips are being handed out across the country, state governments in India are in a state of denial. According to Laveesh Bhandari of Indicus Analytics, states in the south and the west, which have a large number of export-based industrial units have been hit the most by the global financial meltdown.
And now some good news - India’s inflation rate dropped to 3.92% for the first week of February, the lowest in 13-months. All eyes are now on Reserve Bank, which has hinted that there is room for further rate cuts.
On the stock markets, trade was extremely volatile and negative through the week as the UPA government’s vote on account did not meet expectations….and on fears of the US going into further recession. The Sensex closed the week down 8.5% while Nifty dropped 7.3%.
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First Published: Fri, Feb 20 2009. 09 11 PM IST