INDIA Few documents affect more people than India’s government budget. Some of them are investors, dismayed by Finance Minister Pranab Mukherjee: his budget speech sank the Sensex index by 6 per cent. But while the budget does little to inspire, their alarm is overdone.
Observers huff about a budget deficit at 6.8 per cent of gross domestic product, more than double the 2.7 per cent of the 2007-08 fiscal year. But this is not a shock, nor much to get worked up about. The government was already in the red by 6.1 per cent of GDP in 2008-09 because of a fiscal stimulus it is now continuing. This is the right policy while global demand remains frail – and it is hardly excessive compared with US and UK deficits twice as large.
