A report from the Reuters news agency says that India's national budget, released on 29 February, will not show the true cost of government subsidies due to a growing practice of issuing special bonds to oil and fertilizer companies to support low consumer prices.
While these subsidies do not appear on the budget, they do result in costs and risk for the government. For example, "there is a risk that a cyclical slowdown in the economy, which depresses revenues and boosts expenditures, will happen at the same time as heavy bond repayments are being made, with the budget deficit rising significantly," write the HSBC economists Robert Prior-Wandesforde and Manas Paul.
According to a report in Bloomberg, the Indian government has provided 152 billion rupees (approximately US$ 3.8 billion) in bonds to oil and fertilizer companies in the 10 months to January.
India is not the only government that is struggling to shelter consumers from rising food and fuel costs. The cost of some of these policies, such as price controls, usually does not show up in public budgets.
The full Reuters article in available on-line at: http://www.guardian.co.uk/feedarticle?id=7337391
