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India: Government presents FY 2012/13 budget

March 16, 2012

On 16 March, the government announced the Union Budget for the fiscal year 2012/13 ? which starts on 1 April ? in which it anticipates the central government deficit to moderate to 5.1% of GDP, down from the 5.9% of GDP budget gap estimated for the current financial year. According to the text, total revenues are projected to grow 21.5% over the previous year, mainly due to higher indirect taxes, including a 2% rise in excise and service tax rates. Total expenditures will increase 13.1%, fuelled by strong growth in capital expenditures, although current expenditures are projected to grow at a softer pace. The government stated that the budget is focused on creating a domestic sector-driven recovery ? including higher infrastructure spending and improved conditions for capital spending ?, developing the agricultural sector and strengthening governance, as well as improving social conditions such as healthcare, education and employment development. According to the cabinet, the central government deficit should continue to narrow in the medium term, falling to 4.5% of GDP in the fiscal year 2013/14 and to 3.9% of GDP in FY 2014/15. Consensus Forecast panellists are sceptical, however, about the government's ability to meet its fiscal goals and project


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