Against the backdrop of world-wide anxiety about the state of public finances, India's Finance Minister Pranab Mukherjee will present the annual budget to parliament Friday. India's budgetary situation has deteriorated substantially in the last two years. The overall government deficit is now in double-digit territory and government debt exceeds 80% of GDP. Whether urgency and dramatic progress will mark this budget remains the question.
First, there is little pressure for immediate corrective action. Public finances may be well into the red, but not so the overall economy. At an expected 7.5% growth rate for the year ending March this year, the economy has bounced back strongly, surviving both the global financial crisis and shrugging off the effects of a weak monsoon and poor harvest last year. And although inflation remains high, economic growth seems to be heading inexorably toward dizzy pre-crisis levels. The mood remains buoyant, especially because of the contrast with the performance of the industrial economies.
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