Singh Seen Risking Fiscal Aims on $21 Billion Food Plan: Economy Indian Prime Minister Manmohan Singh’s $21 billion-a-year program to provide cheap food for the poor threatens to impede the nation’s efforts to pare the widest budget deficit in major emerging countries. The Food Security Bill enacted last week entitles about two-thirds of India’s 1.2 billion people to low-cost grains, boosting food subsidies to as much as 1.2 percent of gross domestic product yearly from 0.8 percent, Nomura Holdings Inc. said. The policy could pose a risk to Singh’s goal of cutting the fiscal gap to 4.8 percent in 2013-2014, Morgan Stanley said. “The food bill will be unequivocal bad news for fiscal dynamics,” said Rajeev Malik, a Singapore-based economist at CLSA Asia-Pacific Markets. “While it could be politically beneficial for the beleaguered Congress-led government, the medium-term fiscal challenges created by the legislation continue to be ignored.” Finance Minister Palaniappan Chidambaram has pledged to pare the deficit to 3 percent of GDP by 2017, part of wider policy changes since September to avert a credit-rating downgrade and revive India’s economy. The full fiscal strain of the food program will be felt next year and may weigh on bond prices, according to ICICI Securities Primary Dealership Ltd. The food initiative is a key plank of the government’s re-election strategy ahead of polls due by May 2014. Singh aims to build on vows to help the poor in a nation where World Bank data shows over 800 million people live on less than $2 per day. bloomberg/news/2013-07-08/singh-seen-risking-fiscal-aims-on-21-billion-food-plan-economy.html
Posted on: Tue, 09 Jul 2013 04:26:41 +0000
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