Business Sphere

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- By Chandra Shekhar

ith several months in the current fiscal over, it is time for the Finance Ministry to take stock of the situation and move ahead with mid-year correction­s to the extent possible to meet the targets and other crucial parameters set in February for the financial year 201213. Finance Minister P Chidambara­m, who took charge of the Ministry in August only, had raised various issues at the annual conference of economic editors held earlier in the month. However, the task before the government would be to take action to prevent further deteriorat­ion in government finances, preserve growth which is expected to fall further in the current financial year and push reforms in key areas to prevent downgrade if country’s sovereign credit rating to junk category as had been threatened by global agencies like Standard and Poor’s. All these issues, besides the problems related to current account deficit, fluctuatio­n in exchange rate and subdued investor sentiments are required to be addressed by the government on urgent basis. The real challenge before the government would be to deal with the political problems following the exit of important coalition partner Trinamool Congress (TMC) over the decision of the UPA to move ahead with the opening of the multi-brand retail to foreign investment and also to raise Foreign Direct Investment (FDI) cap in insurance sector from 26 to 49 per cent. Besides, the TMC was also unhappy about the Cabinet decision to open pension sector to foreign investment. Following the exit of TMC, UPA has become a minority government and would be crucially dependent on outside allies like Samajwadi Party (SP) and Bahujan Samaj Party (BSP) for its survival. With more allies quitting the coalition or unreliable partners like SP and BSP withdrawin­g support, the government could fall any moment. The UPA leadership will have to take decisions keeping in view the political compulsion­s and without annoying the supporting parties. In practice it would mean that the government would not be in a position to take hard decisions necessary for putting the economy back on track. The political developmen­ts have definitely impaired the capacity of the government to aggressive­ly pursue reforms agenda and also take up those issues which had been announced earlier. As far as the economic problems are concerned, the foremost task before the government would be to revive growth. The growth rate during 201113 slipped to nine-year low of 6.5 per cent. This was of course the bad news for the government, which had in the last decade tried to promote growth

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