Subsidy rollover really a gimmick?

Sachin Karpe feels that India’s subsidy reshuffle and rolling it over to the budget of next fiscal will see some strategic advantages.

The step is taken by finance minister P Chidambaram to portray the meeting of fiscal deficit target. The ballooning subsidies have always offered respite to the citizens of India but have continued to hurt the pockets of government. Due to the socio-political advantage it offers, subsidies have prevailed in important segments like fuel.

By passing over some costs in the next fiscal, finance minister can very well portray that he met his targets. But, he will also be burdening the next government with additional costs, making it difficult for them to meet their targets. It could have a stimulating effect on the economy, Sachin Karpe feels.

Such a step is also taken to ward off negative ratings of credit rating agencies which are hugely followed by global investors. During the troubled times, a bad investment rating is the last thing Chidambaram wants, which will reduce country’s borrowing capabilities, says Sachin Karpe. The stock market is yet again choppy and will continue to be so in the comings few months which are going to witness a lot of volatility ahead of general elections and some prominent announcements from Reserve Bank of India (RBI).