Earlier this week, India’s Finance Minister P. Chidambaram presented the government’s interim budget plans, unveiling a package of indirect tax cuts. After facing what many have called the economy’s ”worst slowdown in nearly a decade,” the government’s new budget plans may be a first step towards reviving economic growth in India.  While Chidambaram was demonstrably worried about the deceleration of manufacturing investments, terming it the Achilles’ heel of the Indian economy, he emphasized the “stellar performance of the agriculture sector” and the sharp recovery of exports despite declining overall growth in global trade. He attributed these achievements to several notable government decisions that were “courageous and long overdue,” such as the correction of diesel prices and the deregulation of sugar.  Moreover, he pointed out that the “bold step to set up the Cabinet Committee on Investment and the Project Monitoring Group” was key to solving inefficiencies in project administration, thereby clearing the way for the completion of 296 projects with an estimated project cost of INR6.6 trillion (US$106 billion). With regard to the interim budget, Chidambaram announced that the fiscal deficit for the current financial year would be contained at 4.6 percent of GDP compared to 4.9 percent of GDP in the previous financial year. While he does not want to break with existing conventions by changing tax laws in an interim budget, he believes that the current economic situation calls for immediate intervention. Therefore, he suggested that factory-gate taxes on some capital goods and consumer durables would be reduced to ten percent from 12 percent, and excise duties on small cars, two wheel and commercial vehicles would be cut to eight percent from 12 percent.

(India-briefing)