Goldman Sachs has described the 1998-99 budget presented by the Bharatiya Janata Party (BJP)-led government a "disappointment" and said the government has missed an opportunity to usher in bigger reforms. It expects GDP growth during the fiscal year to be around 5 per cent, fiscal deficit close to 6 per cent of the GDP, and the rupee to weaken further.
In its latest Asian Economics Analyst, which is a weekly round up of the economic scenario as perceived by the investment banker in Asia, it said: "Rather than using the domestic support garnered by the nuclear tests to push forward reforms, the government has back-tracked. The budget favours the populist\isolationalist streak in the BJP at the expense of reforms."
On efforts to reforms areas like public sector, labour and land reform, Goldman Sachs pointed out that the privatisation of public enterprises is targeted at companies that were not sold in 1997-98. And it felt that the labour reform programme is mostly a safety net scheme for PSU employees and there was nothing on new legislation for hiring or firing. But it felt that the best proposals are on land reforms where legislation limiting land supply has been repealed and a new tax incentive for housing added.
The investment banker said that the step back on import tariffs and the lack of anything new on foreign direct investment means that spurring faster long-run growth with this set of policies is not on. Meanwhile, India's trade gap continued to widen considerably during April as import growth outstripped export growth, the analysis pointed out. The trade deficit for April 1998 was US $ 0.88 billion. Exports increased only 2.2 per cent year- on-year and imports by 13.9 per cent year- on-year, driven by a 26 per cent increase in non-oil imports.
