Are Stake Sales in Public Enterprises Sufficient to Finance Indias Fiscal Spending?
Rating agencies have warned that further stimulus and the rising fiscal deficit, which is estimated to be around 11% of GDP in 2009, will increase risks to India’s debt ratings. India, however, says that sustaining the sharp growth slowdown trumps these concerns. The new government expects to close the fiscal gap once growth revives and revenues are raised through tax rate increases and reforms, disinvestment of state enterprises and ending the administration of fuel prices. Still, the looming deficit narrows the possible use of stimulus, and the government faces opposition to achieving its revenue-generation and growth goals. Political opposition may limit disinvestment and keep food and fertilizer subsidies high. Though the government will de-administer fuel prices up to US$70/barrel oil, oil prices are already close to that level and will remain a fiscal burden. Fiscal stimulus and government borrowing may offset low corporate-sector issuance and weak private demand in the short-ter
