India to Borrow and Spend More in 2010-2011

[desiman]

I take CIA data with a grain of salt. It has factual errors, like India's public debt to gdp ratio of 60%, which is in fact much higher. This year's budget, for example, says India aims to bring it down to 80% of GDP in the next few years.

And i take your info with a bucket of salt lol

 

[ramu]

Facts

1. Fiscal deficit pegged at 6.9% in 2009-10 as against 7.8% in the previous fiscal. Government's net borrowing to be Rs3,45,010 crore for 2010-11.

2. Disinvestment of PSUs in 2010-2011 year pegged at 40,000 crore while a few Peg it at 25,000 crore on the lower side of the spectrum.
3G auction in the next 3 months pegged at 75,000 crore

3. In total, 1,00,000 crore is the conservative one time earning for this financial year. This will grossly affect the balance sheet of India and if this is factored into the fiscal deficit, the deficit will fall below 5%.

On a different note, I will request the Indian members not to answer trolls as it simply results in flaming the thread.

Just my 2 cents.

 

[12345]

LOL r u sure mr.think tank..

U might have refrained from saying that. Since every forum has their own standards.

 

[desiman]

U might have refrained from saying that. Since every forum has their own standards.

lol they sure do

 

[Storm Force]

I wouldn,t worry about India too much.

ITS THE BEST MANAGED ECONOMY IN SOUTH ASIA BY MILES.

 

[rakesh_sabrah]

Need Some Research...!!!!

 

[NSG_BlackCats]

IMF has lent money to Pakistan, but even after one includes this debt, our ratios are lower than India's. So going by your argument, the Indian government has to receive an even bigger "bail out" to rescue its economy and unsustainable spending?!

This is the economic survey for 2009-2010 presented by our FM on parliament on 27th Feb 2010. Here what he says about BoP (Balance of Payment). I quote,

India’s BoP exhibited considerable resilience during fiscal 2008-09 despite one of the severest external shocks. The current account balance [ (-) 2.4 per cent of GDP in 2008-09 vis-à-vis (&#8211 1.3 per cent in 2007-08] remained well within the sustainable limits and there was limited use of foreign exchange reserves, despite massive decline in net capital flows to US$ 7.2 billion in 2008-09 as against US$ 106.6 billion in 2007-08.

Source

The IMF/other countries didn't bail Pakistan out any more or less than this $100B of debt is going to bail India out.

Why we need any bailout? Our foreign exchange reserve is $284 billion as on 8th Jan 2010 (Source). Even if we borrow $100 billion (as per you) from multilateral agency we will never default as we have a very health foreign exchange reserve.

Now, why Pakistan faced the fear of default in 2009? Your foreign exchange reached $ 9.38 billion. In other words you have foreign exchange with which you can import for only 3 months. At the same time you have to make scheduled payment for your borrowings from multilateral agency. So IMF comes into picture to save Pakistan from defaulting.
Please go through this source.

Because India has a very healthy foreign exchange reserve compared with Pakistan we will not face any such situation in near future.

But what amuses me is your reaction to a comment I made about the massive borrowing India is currently engaged in, even after accounting for the size of GDP. For some reason, this has you worked up in a tizzy and you're talking about Pakistan's economic growth rate.

Do not get amused mate. I am telling you why.

Our external debt at the end of September 2009 stood $242.8 billion. As of September 2009 our long-term debt showed an increase of $19.2 billion and went up to $200.4 billion, the short-term debt came down by $985 million to $42.4 billion. (Source). I hope you understand the difference between long term and short term debt. If not than please go to World Bank site you will have a great idea. So against a foreign exchange of $284 billion our current short term debt is only $42.4 billion. So we do not need any IMF.

It's quite meaningless to celebrate growth if you've borrowed with both hands and grown more than Pakistan over the past few years... If you look at the historical average since 1947, Pakistan has done better than India even in growth rates. We haven't received near the levels of aid India has required even in basic items like food to avert famine etc. and we've done all of this from starting point that was far more disadvantaged as compared to your own. For one, we never got the funds and resources that were rightfully ours at the time of partition.

But we haven't let any of this stand in our way. Yet, you can't take a factually correct comment about India's massive borrowing?

Agree, you have done great economically as a country compared to India. Good to know that you have never received any aid like India.

But we are a poor country. So we need a lot of add you know. But the add is not for free. It is part of our long term debt, which we repay. So by providing add nobody is doing us a favor.

Indian economist may not be that smart like their Pakistani counterpart. That may be the reason they are borrowing heavily to improve our bad infrastructure. So what if GoI is investing 85,000 crore to provide metro train services in all 6 big Indian metro cities. GoI was really mad when they setup STPI (Software Technology Parks) all over India and make them tax free for 10 years. But you know, our software industry which was mere $150 million in 1992 is going to cross $50 billion in 2010.

You are incorrect. India's growth rate in 2009 was 6.7%

Have you read the date mentioned on your source? It is May 29 2009. The growth mentioned in your source is for financial year 2008-09. I said our growth will be 7.2% for 2009-10 financial year. As per the economic survey Presented by our FM on parliament on 27th Feb 2010, our GDP growth is 7% for April-Sept 2009. So he predicted our GDP will grow by 7.2% in 2009-2010.

Source

 

[Trisonics]

Wow! $100B worth of borrowing... On a $1.2T GDP, it's an 8.3% deficit. Pakistan's fiscal deficit for '09 was 4.3% and current account was 5.3%. I guess one can act like a spend-thrift and increase defence budgets if macro-economic balances are no longer a concern!!

I would strongly suggest you first research or please enlighten me why you have equated India's deficit of 8% to defence spending. How did you come to that conclusion? I would also like to know why the global downturn did not have a role in it or the following Stimulus Packages

* Pay & Pension Revision: Rs. 28,505 Crores ($5.85 Billion)
* Oil Subsidy (Oil Bonds): Rs. 65,942 Crores ($13.54 Billion)
* Fertilizer Subsidy (incl Bonds): Rs. 64,866 Crores ($13.32 Billion)
* Food Subsidy: Rs. 11471 Crores ($2.36 Billion)
* NREGA: Rs. 25,000 Crores ($5.13 Billion)
* Farmer’s Debt Relief: Rs. 15,000 Crores($3.08 Billion)
* Transfer to States: Rs. 12,741 Crores ($2.61 Billion)


And from when did fiscal deficits of two countries become a comparison metric if you meant to say 8 > 5, my 2 year old niece would say yes too

 

[RiazHaq]

India's growing union budget deficit does not tell the whole story. On top of the union budget deficit of 6.9% of GDP, the gross fiscal deficit of state governments is budgeted to increase to 3.2% of GDP in 2009-10 (Budget estimates), compared with 2.6% of GDP in 2008-09 (revised estimates). Revenue account turned from a surplus of 0.2% in 2008-09 (RE) to a deficit of 0.5% of GDP in 2009-10 (BE), according to a study 'State Finances: A Study of Budgets of 2009-10,' released by the Reserve Bank of India (RBI).

The study also noted that state-wise, revenue accounts of four states West Bengal, Punjab, Kerala, and Rajasthan recorded revenue deficits during 2008-09 (RE). Jharkhand turned from a revenue deficit to a revenue surplus state. In 2009-10 (BE), 10 states are expected to turn revenue deficit from a surplus status in the previous year. Overall, the revenue account is expected to be adversely impacted in the case of 23 states during 2009-10 (BE), the study noted.

The debt-GDP ratio of state governments came down to 26.2% in 2008-09 (RE) from the peak level of 32.8%, at the end of March, 2004. However, outstanding debt is budgeted to increase marginally to 26.5% of GDP by end-March 2010. The XII Finance Commission had recommended that states achieve a debt-GDP ratio of 30.8% till the end of March 2010.

Haq's Musings: India to Borrow and Spend More in 2010 Budget

 

[ramu]

India's growing union budget deficit does not tell the whole story. On top of the union budget deficit of 6.9% of GDP, the gross fiscal deficit of state governments is budgeted to increase to 3.2% of GDP in 2009-10 (Budget estimates), compared with 2.6% of GDP in 2008-09 (revised estimates). Revenue account turned from a surplus of 0.2% in 2008-09 (RE) to a deficit of 0.5% of GDP in 2009-10 (BE), according to a study 'State Finances: A Study of Budgets of 2009-10,' released by the Reserve Bank of India (RBI).

The study also noted that state-wise, revenue accounts of four states West Bengal, Punjab, Kerala, and Rajasthan recorded revenue deficits during 2008-09 (RE). Jharkhand turned from a revenue deficit to a revenue surplus state. In 2009-10 (BE), 10 states are expected to turn revenue deficit from a surplus status in the previous year. Overall, the revenue account is expected to be adversely impacted in the case of 23 states during 2009-10 (BE), the study noted.

The debt-GDP ratio of state governments came down to 26.2% in 2008-09 (RE) from the peak level of 32.8%, at the end of March, 2004. However, outstanding debt is budgeted to increase marginally to 26.5% of GDP by end-March 2010. The XII Finance Commission had recommended that states achieve a debt-GDP ratio of 30.8% till the end of March 2010.

Haq's Musings: India to Borrow and Spend More in 2010 Budget

for the info ! Yes we are building roads at the rate of 20 Km per day and that is about 700 Km per year. We need money to finance them and debt is a good option. India in the recent past bought 300 tonnes of gold from IMF and do you know the converted value of that asset? Now the reason why getting debt is not a problem is because we have a reserve of over 250 billion $ in foreign exchange. We have also hedged our bets with a significant asset class such as gold. The market capitalisation of ONGC, BHEL, NTPC, SBI, NHPC, etc is mind boggling. And the majority share holder is GoI. Is that greater than the debt you are talking about?

You don't read replies to your post do you ? BTW, I did notice that you have till date not thanked a single post ! Is this an indicator?

The wealth owned by the GoI is close to 1 trillion $ in 2006 by considering its corporate assets (PSUs). India is yet to divest its PSUs and is planned for this financial year. Please refer to the market capitalisation of state banks and that will offset the debt that you have computed.

On comparison, each company listed on Karachi stock exchange can be bought out by one man in India and will still have half is assets left over. If you want to discuss India's debt then please do but don't make it sound as though we are living on our credit cards. In all honesty, we don't mind living on credit cards as long as we have enough assets to pay for it.

 

[karan.1970]

Wonderful, now we have invented a new brand of economics!

Yes, internal debt doesn't matter because the central bank can simply print money and pay it off when it comes due. This sort of thing doesn't cause inflation or anything...

So here's my view..

While the total public debt figure is important enough, the external debt figure(that is a subset of the total public debt) is extremely critical since that deals with the money the govt has borrowed from sources external to the country. Like the USA and China tango.. Thats why external debt is called sovreign debt as well.

Its not the question of new brnad of economics, but the importance of different facets of economic data in the given global scenario. While the govt can use measures like printing money to take care of domestic debt which obviosuly will lead to increased inflation (which can be controlled by other means) in the market and result in pain for the population, such an option is not even available in case of sovreign debt. Hence the ratio of external debt to available reserves assume criticality...

 

[samika]

I am so happy that we have people like Riaz Haq who is always worried about India more than his very own Pakistan. We really need people like you, it feels really good that someone from other country wastes so much time to write about US (INDIA).

We are really blessed to have an intelect like you. Not every country is lucky to have one.

Feels really really good. Please never stop writing. I would pay to see that. Add me as one of your fans.

 

[RiazHaq]

So here's my view..

While the total public debt figure is important enough, the external debt figure(that is a subset of the total public debt) is extremely critical since that deals with the money the govt has borrowed from sources external to the country. Like the USA and China tango.. Thats why external debt is called sovreign debt as well.

Its not the question of new brnad of economics, but the importance of different facets of economic data in the given global scenario. While the govt can use measures like printing money to take care of domestic debt which obviosuly will lead to increased inflation (which can be controlled by other means) in the market and result in pain for the population, such an option is not even available in case of sovreign debt. Hence the ratio of external debt to available reserves assume criticality...

Although rising public debt is always a concern, I agree that India's saving grace is that about 90% of its public debt is owed to its own citizens who save about 30% of their income. Of the rest, a big chunk of debt is held by IFIs like the World Bank, which, are not likely to press for quick repayment.

But a scenario like the Greek situation (as well as PIGS debt) with its Euro-denominated debt should not be ignored. After all, Euro IS also Greek currency.

 

[desiman]

I am so happy that we have people like Riaz Haq who is always worried about India more than his very own Pakistan. We really need people like you, it feels really good that someone from other country wastes so much time to write about US (INDIA).

We are really blessed to have an intelect like you. Not every country is lucky to have one.

Feels really really good. Please never stop writing. I would pay to see that. Add me as one of your fans.

lolzzzzzzzzzzzzzzzzzz

 

[Vasily Zaytsev]

Mr. Haq,

One more thing please look for India's sovereign ratings also which could give you some idea of the state of India's borrowing. Though ratings lag the reality it gives a fair bit of idea of the economy.

As far as greece or for that matter any other country under euro umbrella is concerned no country can print euro currency on their own. The money supply is totally controlled through brussels. Hence Greece can default on its euro borrowings. But that is not the case with India.

Also there are I think 15 countries with euro currency, right? Then how come each one has different rating?

Here is a pickle for you.....Greece, France, Germany, Portugal all use Euro. Are their soverign ratings (Moody's) same? If not then why?