South Asia Monitor: India: Cautious Budget 2000 - April 01, 2000

April 1, 2000

India's budget for Fiscal Year 2000 was carefully crafted to minimize the political complications of cautious steps toward reform. The business community greeted it with disappointment. Political parties-including government coalition members found it too harsh. It featured measures to benefit information technology, modest steps toward streamlining taxes and reducing subsidies, and a massive hike in defense spending. The aggregate deficit, is still dangerously high, projected at over 10 percent of GDP. The current revival of industrial growth may ease next year's budget management, but fiscal overload is bound to depress the new investment needed to reach the government's hoped for 7-8 percent growth rate. While the government wants to move the reform agenda forward, there is little consensus on the short list of key moves and their sequence.