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B&E This Fortnight
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Issue Date - 30/04/2012
Budget 2012: Balance check

When Pranabda quoted Shakespeare’s Hamlet on Budget day and emphasised on the need for tough short term decisions for the long term, there was an eager anticipation that some bombs will be dropped. However, it seems he actually meant ‘long term’ with regard to the UPA! Even amidst low expectations post the Railway budget fracas, this budget managed to surprise just about everyone. The FM continued to tilt towards the ends of populism and political appeasement, while the industry in general had precious little to cheer, dread or even talk about!

If there is one big idea, it’s in terms of infrastructure, where the government envisages an investment of Rs.50 trillion in the 12th Five Year Plan. Half is expected to come from the private sector. A number of sectors within the ambit of infrastructure have been deemed eligible for Viability Gap Funding. The minister also proposed to double the amount to be raised from tax free infra bonds to Rs.60 trillion, easing of credit and removal of various ambiguities to boost private investment. Considering what infrastructure can deliver to multiple sectors in the economy, this one idea needs to be pursued in the right earnest.

Can’t they give up on Greece?

After much drama (which is nothing new as far as the eurozone is concerned), Greece finally managed to save its day; at least for the time being as private creditors along with some banks agreed to the biggest debt write down in the history of government debts. The new deal has enabled another round of bailout to keep the eurozone from being dragged further into chaos. Had this agreement not gone the distance, Greece would have run the risk of defaulting on its debt within two weeks. Before the deal, Greece had a debt load of around $487 billion. The new arrangement will shave off $190 billion. Further, the ‘bond swap’ deal will open the doors for Greece to secure a $172 billion rescue package from other Eurozone countries and the International Monetary Fund (IMF). After S&P and Moody’s, credit ratings agency Fitch has also downgraded Greece to ‘restricted default’. We’ve said it before and we’re saying it again. If things have to look good, Greece needs to be cut off from the eurozone.


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