Budget: India to keep tight lid on spending

Updated 16 February 2013
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Budget: India to keep tight lid on spending

NEW DELHI: India’s finance minister is planning to cut the public spending target for fiscal 2013/14 by up to 10 percent from this year’s original target, in what would be the most austere budget unveiled in recent history as he tries to avert a sovereign credit downgrade.
P. Chidambaram has already slashed actual public expenditure in the current fiscal year that ends in March by some 9 percent from the original target. So the plan for 2013/14 would in effect keep a lid on spending, limiting it to a similar rupee level or slightly higher.
Final figures have not yet been worked out. But several officials involved in preparations for the budget to be unveiled on Feb. 28 told Reuters that Chidambaram is determined to rein in the fiscal deficit, having won reluctant agreement from leaders of his Congress party who had wanted a spending spree ahead of the general election due by next May.
Top Congress leaders - including the welfare-minded party chief Sonia Gandhi - did not show up for a pre-budget briefing by Chidambaram on Thursday, signaling that they had fallen in line with his plan, a senior party official told Reuters.
Critics warn that at a time when both private investment and consumer demand are weak, lower public spending risks deepening India’s sharpest economic slowdown in a decade. Growth in 2012/13 is estimated at 5.0 percent, the lowest since 2002/03.
But Chidambaram has argued that a lower fiscal deficit will not only avert a rating downgrade threat but also bolster economic growth prospects as borrowing costs for private investors will fall, helping lift capital investment growth from a five-year low. He told party colleagues at Thursday’s briefing that he was confident of taking growth back to 6-7 percent in 2013/14.
New Delhi missed its 2011/12 fiscal deficit target of 4.6 percent of gross domestic product by 1.2 percentage points, prompting threats of a downgrade from ratings agencies Fitch and Standard & Poor’s.
India has a BBB minus rating with a negative outlook from both S&P and Fitch, the lowest investment grade among the BRIC group of large emerging economies. A cut would take the country’s credit rating to junk status.
In a measure of what Chidambaram is aiming to achieve by placing a lid on expenditure, spending for the 2012/13 budget was increased by 13 percent compared with actual spending in 2011/12.
“Our first and foremost priority is to avoid a ratings downgrade,” said one of Chidambaram’s lieutenants, adding that a downgrade would further dent corporate investment and hopes for an economic recovery.
The sources declined to be identified because the budget planning has not been made pubic.
As Chidambaram prepares to tighten the purse strings, some government departments and ministries are bracing for funding cuts of up to 20-24 percent from their original 2012/13 targets, which could crimp plans for expansion of the defense forces, rail lines, highways and even development spending on tribal minorities.
“We are literally begging for funds,” complained a senior official at the Tribal Affairs Ministry.
The proposed cuts will likely reduce the outlay for the Railways Ministry by more than $ 2 billion on top of the $ 1.8 billion cut it faced this fiscal year.
A senior official at the ministry said that, to compensate, the railways have been asked to raise rail fares and form joint ventures with state-run infrastructure companies.
The ministry needs at least $75 billion to complete ongoing projects related to laying new track, modernizing services and improving safety, which are already 10 years behind schedule.
For their part, Defence Ministry officials are worried that budget cuts may delay some important arms procurement plans, as well as a $6 billion project to raise a new battalion on the border with China. The ministry’s budget was cut by $ 1.9 billion in 2012/13.
Chidambaram has promised to achieve a fiscal deficit of 5.3 percent of GDP this fiscal year and 4.8 percent in 2013/14, targets he calls ‘red lines’ that cannot be crossed. Late last year, some economists were predicting that the budget deficit this year could be closer to 6 percent.
Despite his austerity drive, Chidambaram - seen by some as a potential candidate to become prime minister in 2014 - has not lost sight of politics ahead of the looming elections.
Officials say he will use the spending cuts to make headroom for the rollout of a proposed food security law. A populist bill that will expand supply of cheap grain for the poor is likely to be implemented this year at a cost of $ 22.27 billion to the exchequer.


Industry-specific ban on expats in Oman likely to remain, despite reaching recruitment target

Updated 45 min 7 sec ago
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Industry-specific ban on expats in Oman likely to remain, despite reaching recruitment target

  • The Oman government imposed a recruitment ban on expats for 87 different lines of work in January
  • The initial target of recruiting 25,000 Omanis by May is almost reached, not the government is likely to double that number

DUBAI: Oman’s Ministry of Manpower has pledged to continue in its push to recruit locals over expats even after its target was reached, the Times of Oman has reported.

The government set itself a deadline of May, but it was already just 55 jobs shy of the 25,000 target, the report added, predicting that the remaining people would be appointed before the week was over.

Now the government is looking to double the target to 50,000 Omanis.

More than half of those recruited are men, according to government data, with male appointments accounting for 16,884, while 8,061 women were recruited during the same period. 

A ban on hiring expats in 87 professions was implemented in January as the Gulf country continued in its Omanization project, aimed at tackling high levels of unemployment among locals. 

And now the ministry has said Omanis should always be given priority over expats, when it came to hiring – adding that the ban would stay in force as long as there were Omanis suited to the positions.

Those people employed so far were appointed to private sector positions between December 2017 and April 2018, the report added.

 

 

The construction industry accounts for 32.4 percent of those recruited, with 14.5 percent going into the retail sector, 13.5 percent in manufacturing and 7.1 percent working in transportation.

A spokesman for the Ministry of Manpower said: “Most Omanis were hired in the construction sector as it has lots of job vacancies especially in the engineering, technical and administration fields.”

The push in Oman to recruit more locals is in line with other Gulf Cooperation Council (GCC) countries which are following similar projects, not least in Saudi Arabia and the UAE.

 

 

Decoder

An extension to the expat recruitment ban?

Not only is Oman’s Ministry of Manpower considering extending the current recruitment ban on expats for 87 professions, but also adding other lines of work to the list.

FACTOID

In numbers

The most recent census in 2016 put the Oman population at: 4,550,538. But expats account for nearly half at 2.082 million. There are 2.463 million Omanis