Byapaar.com -The Indian Business Blog

Day before yesterday, the caretaker Finance Minister of India Mr. Pranab Mukherjee (the Ministry usually lies with the Prime Minister Dr. Manmohan Singh who is recovering from By-pass surgery) announced another round of stimulus package to bring impetus into the economy. This is the third such initiative by the government in as many months. This time no fund is to be infused to help the market reeling under severe liquidity crunch but the latest effort is aimed at reducing production costs of goods so that demand increases and industry grows. For this purpose the government has reduced excise duties on several products by 2 percent to 8 percent from existing rate of 10 percent. This effectively means cheaper steel, cement and consumer durable goods. The automobile sector which had a booming last year but suffering from current economic meltdown will not benefit directly. But due to cheaper rates of raw materials and accessories it might get some indirect lift. Also the heavy vehicle sector which has excise rate of 20 percent will get direct benefit from the latest move.

But the highest gain will be reaped by the service sector as service tax too was slashed from present level of 12 percent to 10 percent. It will benefit all those industries engaged in service sectors like hospitality, BPO and telecom. Experts expect that mobile rate will come down due to reduction in service tax. This reduction in taxes will cost the government to the tune of Rs. 300 billion.

This third stimulus package was announced on a day global rating agency Standard & Poor downgraded India’s sovereign credit rating due to ever growing fiscal deficit that is likely to be around 11.2 percent of GDP (Rs. 3620 billion) during this fiscal ending 31st March. Being an election year, the government took many populist measures like hiking central government employees’ salaries, writing off agricultural debt, high crude prices for most part of the year and lastly but not the least – the economic stimulus packages. This down gradation will not harm the government as it seldom borrows from foreign Read the rest of this entry »

Its election time folks. One can feel it in the air through out India. I too can feel it.

It has been quite long since I blogged on my favorite India business blog or my education blog which are so dear to me because they are my personal blogs and in no way commercial.

The UPA government led by Dr. Manmohan Singh just presented its last budget for the current five years term and it can only be known after elections if  people of India give them another chance or they vote for a change. Elections, whether local, regional or nationals are always the biggest events simply because India, the largest democracy in the world has a unique political system in the sense that hundreds of parties vie for election glory.

With elections, come populism. True, it is the norm for every government in the world to entice the electorate with popular measure on the eve of elections - but they pale in nature and magnitude when it comes to India. True to the style, the UPA government announced huge salary hike for its close to three million civil servants costing the exchequer nearly $8 billions. It also waived huge amount of agricultural loans to farmers costing around $15 bilions. On top of it the Mumbai horror caused the government to allocate more extra funds to the armed forces. In between came the global economic crisis that resulted in the government spending hundreds of billions to infuse the liquidity starved market with more cash.

But all these has not deterred political parties rulling different states of the country to announce populist measures ahead of the national election slated to be held form 2nd week of April. Just the other day, Uttar Pradesh government led by Bahujan Samaj Party chief Ms. Mayawati as Chief Minister announced employment of 26,000 teachers at a time when experts says $782 billion bail-out package of the USA government is not enough and 50 million people around the world are to loose jobs by end of 2009!!

Still, the Railway Minister of India, Mr. Lalu Prasad Jadav of Rastriya Janata Dal (RJD) Read the rest of this entry »