Home' Trinidad and Tobago Guardian : March 5th 2015 Contents BG20 | INTERNATIONAL
BUSINESS GUARDIAN www.guardian.co.tt MARCH 2015 • WEEK ONE
India s finance minister pledged major
investment in infrastructure on Saturday,
saying it was time for the economy to
"fly", as he unveiled the new right-wing
government s first full budget.
Arun Jaitley said his government had inher-
ited an economy dominated by "doom and
gloom" when it took power last year, trum-
peting its achievements in conquering inflation
and kick-starting growth.
"The credibility of the Indian economy has
been reestablished. The world is predicting
this is India s chance to fly," he said.
Prime Minister Narendra Modi swept to
power last year on a pledge to revive India s
flagging economic fortunes and provide jobs
for its 1.2 billion people.
But he has been criticised for failing to push
through the concrete reforms experts say India
needs if it is to attract much-needed foreign
On Saturday Jaitley said the government
would increase spending on the country s
crumbling roads, railways and ports by US$11.3
billion in 2015/16 as it seeks to win back invest-
ment and boost growth.
He pledged to complete 100,000 kilometres
of roads currently under construction, build
another 100,000 kilometres and commission
five "ultra mega" power projects to help end
The government will set up tax-free infra-
structure bonds to finance its plans through
a national fund that will receive a 200-bil-
lion-rupee ($3.2 billion) injection of public
Jaitley also announced plans for a universal
social security system that would give poor
Indians access to subsidised insurance and
A new insurance scheme will provide cov-
erage for accidents and death for just 12
rupees---less than US 20 cents---a year for
India s poorest.
The government also plans to set up a basic
pension scheme for the millions of Indians
currently unable to afford to put money aside
for their old age, Jaitley said.
Focus on poverty
Despite new figures showing the economy
is growing at a faster clip than previously
thought, many ordinary Indians have yet to
feel the benefit.
Modi s Bharatiya Janata Party (BJP) last
month suffered a drubbing in Delhi state elec-
tions, its first major defeat at the polls since
it stormed to power, with critics saying Indians
were tired of waiting for change.
Jayshree Sengupta, senior fellow at the
Observer Research Foundation, said the budget
was surprisingly focused on poverty.
"I was thinking that this budget would be
very pro-industry, pro-corporate sector. But
very surprisingly, the budget has a lot for the
common person in India," she said.
"It has gone into schemes which will actually
bring about a welfare system for all, especially
Jaitley announced plans to cut the corporate
tax rate from 30 to 25 per cent over the next
four years and replace a wealth tax with a
two-percent levy on the super rich.
He said India had been "losing on both
counts" because it was perceived by investors
as a high tax economy, but realisation was
very low due to the high number of exemp-
Analysts broadly welcomed the moves, but
said the budget was light on the big bang
reforms that many had hoped to see.
"We all knew in our hearts that in a big
democracy like ours (such) moves are most
unlikely," said Alok Churiwala, head of Churi-
wala Securities in Mumbai.
Jaitley said the government would achieve
its goal of cutting the fiscal deficit to 4.1 per
cent of gross domestic product (GDP) for
2014/2015 from 4.5 per cent the year before.
But he said it would delay by a year the goal
of cutting the deficit to 3 per cent, forecasting
a figure of 3.9 percent in 2015/16.
'Funding the unfunded'
Jailey signalled defence spending would rise
to 2.47 trillion Indian rupees (US$40.07 billion),
up from 2.29 trillion rupees in the current
year, as India seeks to counter regional rival
The government has forecast that growth
for 2014/15 will reach 7.4 per cent, making it
the world s fastest growing major economy.
India s economy has been seen as stagnating
in recent years and the dramatic turnaround
is due partly to a change in the way GDP data
But economists say low oil prices and
reduced inflation have given India a genuine
India s government heavily subsidises food
and fuel and there had been speculation Jaitley
would seek to slash the multi-billion dollar
Instead, he pledged to make the schemes
more efficient and reduce corruption by accel-
erating the roll-out of biometric cards and
expanding direct cash transfers.
He also said he would make it easier for
small businesses to obtain credit through
"Just as we are banking the unbanked, we
are also funding the unfunded," he said.
The Bombay Stock Exchange, which is usu-
ally closed on a Saturday but remained open
for the budget, was down slightly as the lack
of major reforms hit investor sentiment.
It fell 0.43 per cent, or 126.38 points, to
29,093.74 points. AFP
China s central bank cut inter-
est rates for the second time
in three months Saturday,
adding to signs the country s
leaders are worried the eco-
nomic slowdown is deep-
ening too sharply.
The People s Bank of China announced a
rate cut on one-year loans by commercial
banks by 0.25 per centage point to 5.35 per
cent. The interest rate paid on a one-year
deposit was lowered by 0.25 point to 2.50 per
Rates were last cut on November 22. The
new rates take effect Sunday.
Last year, China s economic growth fell to
7.4 per cent; the lowest since 1990. It is
expected to decline further this year, and a
steep economic decline can raise the risk of
politically dangerous job losses.
The latest round of cuts follow a string of
tax reductions and other measures aimed at
propping up growth. The government cut
business taxes last week and has announced
a pay hike for civil servants.
The lower rates are expected to reduce finan-
cial costs for state companies and are a signal
to state-owned banks to boost lending to
Economic growth in the world s second-
largest economy has slowed down steadily
over the past two years, mostly as a result of
government efforts to steer the economy to
more self-sustaining growth based on domestic
consumption and to reduce reliance on trade
Eswar Prasad, an economics professor at
Cornell University, noted that China has been
a primary driver of global economic growth
and that the slowdown will have a negative
ripple effect throughout the world.
Still, Jay Bryson, global economist for Wells
Fargo Securities in Charlotte, North Carolina,
emphasised that China s economy is still grow-
ing, just at a slower rate.
"China is not collapsing. You re looking at
a country that was growing at double digits,
and now it s only going to grow six to seven
per cent," he said.
"We re talking about slower global growth,
not another 2009," he added, referring to the
global financial crisis.
The impact of the slowdown will vary
depending on a country s exposure to China.
In the US, Bryson said most people won t
notice the impact at all. While US exports to
China total about US$100 billion a year, he
said that s less than onr per cent of the gross
domestic product of the US, which has a US$17
trillion economy. AP
India pledges infrastructure
spending to help economy 'fly'
China's central bank cuts rates again to boost economy
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