India's Finance Minister Palaniappan Chidambaram ready to deliver his budget (photo:dpa)

India goes for a ‘holding budget’ in the run up to its 2014 election

The credit ratings agencies have been hovering over the Indian economy with their eyes set on its huge fiscal and current account deficits and its rate of inflation. The budget presented for the coming financial year appears to have quelled fears of a downgrade for now. But in just over a year, India will hold its next general election, and politicians might be tempted to increase borrowing to woo the electorate.

INDIA’S economy faces its biggest challenge since 1991. Growth has slipped to around five per cent from a high of nine per cent between 2005 and 2008. Inflation has hovered near nine per cent for the past two years, the highest among emerging economies.

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 Barun S. Mitra
The challenges for Mr Chidambaram are to cut the country’s fiscal and current account deficits, and to curb inflation
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