South Asia Monitor: "A Calculated Risk": India's New Budget - August 03, 2009

On Monday, July 6, India's finance minister Pranab Mukherjee unveiled a $210 billion budget that emphasized rural spending, took a cautious approach to reform, and included some useful changes in tax policy. The rise in government spending should stimulate domestic demand, but it will also widen the fiscal deficit to its largest gap in 18 years. Despite the critical reception that followed Mukherjee's speech, the case for short-term stimulus is strong, and if growth does pick up and the government maintains spending discipline, it will be able to manage the fiscal deficit.