- 07/27/2019 at 7:39 pm #1524847EduGorillaKeymasterSelect Question Language :
Direction: Read the following passage carefully and answer the questions that follow.
“How do you maintain the balancing act between continuing to spend in an economy, continuing to maintain your banks and support them, and how do you maintain the standard of fiscal prudence?” Jaitley said. “And this is the challenge we are facing.”
Speculation had been swirling about a stimulus to revive Asia’s No. 3 economy that’s bogged down by sweeping currency and tax-policy changes. With elections a little more than a year away, pressure has been building on Prime Minister Narendra Modi to spur investment and create jobs for the swelling workforce. The problem is that U.S. tightening and rising global oil prices make it tougher for India to spend more.
Investors are awaiting details on what the government will do, said Sonal Varma, chief India economist at Nomura Holdings Inc. “Fiscal slippage has been a risk, but whether actual slippage occurs is dependent upon whether the government prioritizes fiscal credibility or faster growth,” she said.
India aims to shrink its budget deficit to 3.2 percent of gross domestic product in the year through March 2018 from 3.5 percent the previous year. Jaitley declined to provide details on the government’s plans to spur growth.
Indian bond yields jumped and the rupee fell on Thursday on concern that the government will forfeit its goal to shrink Asia’s widest budget deficit. The federal shortfall was at 92 percent of the full-year target in the first four months of the fiscal year started on April 1 compared with 74 percent in the previous year.
“It’s not about expenditure, it’s about the quality of expenditure,” said Amitabh Kant, an adviser to the government. Citing leaky airport toilets and loss-making highways, he urged the government to sell large infrastructure projects and called on companies to expand into the global market.
Any deterioration in public finances risks the wrath of rating companies such as S&P Global Ratings, which this week downgraded China for the first time since 1999 citing soaring debt. India carries the lowest investment grade rating and a cut to junk status could force some investors to dispose of their Indian assets.
“We are all conscious of the fact that there is importance of the kind of fiscal prudence that is required in the economy,” Jaitley said. “At the same time we are also conscious of the need in such situations of spending and obviously the real answer lies in finding the balance between the two.”
The government’s failure to maintain standard of fiscal prudence may result in-
(i) a downgrade in rating by global rating companies
(ii) high depreciation of Indian rupee
(iii) selling of Indian assets by the investors
Post your Training /Course EnquiryAre You looking institutes / coaching center for
- Only (i)
- Only (ii)
- Only (iii)
- Both (i) and (ii)
- Both (i) and (iii)
- IIT-JEE, NEET, CAT
- Bank PO, SSC, Railways
- Study Abroad