The Economist Intelligence Unit Ltd (2005)

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Fiscal

India’s fiscal position is one of the worst in the world. It has not affected the economic position of India yet, but it may certainly do. India’s fiscal deficit stands at 9-19% of GDP. The Left parties oppose anything that would strengthen the fiscal position of the country, such as reducing subsidies (particularly in the form of free power to farmers), making more people pay tax (only 2% do at the moment), cutting bureaucracy and privatising or closing loss-making state companies.

There is a plan to introduce VAT on April 1, a most ambitious project to improve the fiscal situation

Losses of some state electricity firms could start an economic crisis. Mr Singh stated this to the Left parties, as an argument to privatise such state firms.

FDI is rising, but it could be better. It accounts for 1% of GDP, while in China it accounts for 3-4%. Foreign companies operating in India only account for 3% of the country’s exports, while in China it is around a half. This is partly due to the lack of liberalisation

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