Business Today

A tale of two deficits

The only way to make India's fiscal deficit look less threatening, than it really is, would be to compare it with the budget deficit of the United States.

     Print Edition: March 7, 2010

 United StatesIndia
Size of deficit$ 1.56 trillion (Rs 71.76 lakh crore)Rs 4 lakh crore ($87 billion)
Deficit as % of GDP10.6 (Highest since 1945) 6.8 (A 16-year high)

The only way to make India's fiscal deficit look less threatening, than it really is, would be to compare it with the budget deficit of the United States. The deficit is about 20 times bigger in the US that it is in India. The measures to rein in the deficit are also a bit similar — though not identical.

Of course, the fate of the two economies are intertwined beyond the state of deficit, too. A widely anticipated pick-up in the US economy will boost India's exports and also the GDP growth. This, in turn, will help reduce the deficit. Did somebody say decoupling?



HOW THEY PLAN TO REIN IN THE DEFICIT
BARACK OBAMAMANMOHAN SINGH
Allow tax cuts to expire on affluent American families, which is expected to raise $678 billion over the next decade.Unveil a fresh roadmap for fiscal consolidation based on the suggestions of the 13th Finance Commission.
Extract $90 billion from financial institutions over 10 years, with a fee
to recoup taxpayer losses for bailing out the industry.
A gradual and phased roll-back of the stimulus measures.
Scrapping subsidies to oil, coal and natural gas companies will raise a further $40 billion.Disinvestment could earn about Rs 24,000 crore in fiscal 2010-11.
Save $250 billion between 2011 and 2020 by curbing 120 federal projects.The government expects to raise about Rs 35,000 crore from the sale of 3G-spectrum (unlikely to happen this fiscal as planned, which could mean that the deficit could be higher than the estimates).

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