Nitin Desai's observations on Budget 2008

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Mr. Nitin Desai was the Under-Secretary-General for economic and social affairs appointed in 1992. Prior to that he was the Chief Economic Adviser in Central Government, Ministry of Finance, India. He also served as the Deputy Secretary-General United Nations Conference on Environment and Development (UNCED).

Mr. Nitin Desai feels that the budget should focus on the growth and development of the economy. This would be the last budget within the tenure of the UPA Government, so Mr. Desai has warned that the budget should not be biased towards electoral considerations.

The budget would be announced in short time. The track record of the UPA Government suggests that, during their tenure, India experienced low inflation rates and increase in the foreign exchange reserves, while GDP growth rate was nearly 9 %. Even on the fiscal sector the government did well, with improvements in the tax abidance, increase in the tax revenue, introduction of the Fiscal Responsibility and Budget Management Act (FRBM).

Mr. Desai feels that the finance minister may have to answer certain important questions pertaining to the budget such as factors for maintaining growth momentum of the Indian economy during the upheaval in the world economy, increase in the investment flow to the long term infrastructure based projects and fulfilling the political demands, to name a few.

The international economic turmoil would affect the growth of the Indian economy by two different ways. Firstly, by means of the capital market and secondly, due to contraction of exports due to economic slack in other OECD countries.

India is already experiencing the effect on the growth of export due to the appreciation of the Rupee against US Dollar. This year it is expected that the volume of the exports would be lowered with the start of the recession in the US. This deceleration of the exports would effect the growth in the employments and investment sector.

The impact of the disturbances in the global economy would be felt first through the capital market. The growth of the Indian economy was possible due to the large inflow of capital, but with the recession in the world economy the capital market is likely to dry up.

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