(Image source from: Falling oil prices - windfall for India})
Falling oil prices has become a major windfall for India and can now expect a budget that not only hits its targets, but also provides extra cash to support reforms. Budget for fiscal 2015/16 (April-March), which will be unveiled on Feb. 28, is widely seen as a test for Prime Minister's ability to lead economic reform. The economic climate has handed him a chance to pass that test with flying colours. He will be able to set Asia's third-largest economy on a path for growth of 7 percent to 8 percent over the next two years.
"The situation is far better now than in December," said one finance ministry official, "The budget will deliver on Modi's promise of better days for the economy." The fall of global oil prices has allowed the Modi government to raise diesel and petrol fuel taxes and cut diesel prices by 25-30 percent which is a windfall gain for households as well as businesses and dampening inflationary pressures in the economy.
Officials stated that lower fuel subsidies along with recent diesel tax hikes could together add almost 1.1 trillion rupees ($18 billion) to the 2015/16 budget. This will enable the government to spend about 500 billion ($8 billion) on Modi's flagship infrastructure and manufacturing initiatives.
"Everyone knows that the honeymoon period for government will not continue forever, we have to speed up reforms before it is too late," said another official.
By Premji
