Austere budget would defy India's pre-election history

Fri Feb 22, 2013 11:43am IST

Palaniappan Chidambaram speaks during a news conference after a South Asian Association for Regional Cooperation (SAARC) interior ministers meeting in Islamabad June 26, 2010. REUTERS/Faisal Mahmood/Files

Palaniappan Chidambaram speaks during a news conference after a South Asian Association for Regional Cooperation (SAARC) interior ministers meeting in Islamabad June 26, 2010.

Credit: Reuters/Faisal Mahmood/Files

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Reuters Market Eye - Finance Minister P. Chidambaram could defy history if he presents a largely austere 2013/14 budget on February 28, ahead of general elections next year.

A Standard Chartered analysis shows that since the 1990s, spending invariably rises in the two years leading up to a general election.

For example, the government during 1991-96 cut average real expenditure by an annualised 4 percent in the first two years of its term, but raised it by 3.6 percent in the final three years, Stanchart says.

The trajectory was similar for the governments in power from 1999-2004 (2.8 percent versus 9.0 percent) and 2004-09 (-1.9 percent versus 14 percent), the lender says.

The biggest welfare move expected in the current budget is the food security bill, which will likely raise annual food subsidies to 1.12 trillion from 750 billion rupees now, almost a 50 pct hike, Stanchart predicts, quoting government estimates.

GRAPHIC: link.reuters.com/qes26t

(Reporting by Subhadip Sircar)

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