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India needs to fast-track reforms, cut fiscal deficit to support slowing economy: ADB | The Asian Development Bank (ADB)
has said India requires to fast-track reforms and cut down fiscal deficit to support
a slowing economy. Managing Director-General of ABD Rajat M. Nag said India needs
to restore foreign investors' confidence. According to Wall Street Journal, observers
fear that foreign investment in India could drop due to policy uncertainty created
by proposals such as a retroactive tax on merger deals dating as far as back 1962.
Nag said the Indian Government must increase fuel prices to lower subsidies that
have ended up straining its finances. "The 5.1 percent [fiscal deficit] aim for
2012-13 is achievable, but we have to make some tough calls, including on fuel
subsidy," Nag said. India 's fiscal deficit increased to 5.9 percent of gross
domestic product in the fiscal year that ended on March 31, overshooting the budget
estimate of 4.6 percent because of heavy subsidies on fuels, fertilizers and food.
"Perhaps there are too many reforms--land acquisition bill, mining, pension, insurance,
retail. The government needs to prioritize," Nag said. Clarity and predictability
in economic policies are also needed to continue India 's appeal to foreign investors.
He said that inflation in India remains high, which left little scope for easing
of monetary policy and shifting the responsibility of addressing the economic
troubles mostly on fiscal policy. The ADB expects inflation to average out at
seven percent and the economy to grow at the same rate in the current fiscal.
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