India's return to the phase of higher indirect tax revenues will impose disproportionately larger burdens on the poorer sections.

India may be in for a period of slow growth and inflation as agricultural output falls in the first quarter of 2008-09 and manufacturing slows down.

THE Indian economy has been at tipping point for some time now, poised to enter a period characterised by slow growth and high inflation. The government's decision to hike the prices of petrol, diesel and liquefied petroleum gas (LPG) could well be the final push. In the government's view the hike was inevitable, given the sharp increase in the international prices of crude and India's dependence on imports to meet much of its consumption. If the hike came only when it did, it was because electoral compulsions and the opposition forced the government to hold back.

The price of oil should be seen as part of a tax-subsidy framework, serving as part tax when global prices are low and part subsidy when they are high. S. SUBRAMANIUM IF THE GOVERNMENT is willing to compensate oil companies with resources mobilised through taxes on those who can afford to pay, rather than through price increases that burden the rich and the poor alike, prices can be held constant until such time that the inflationary situation is brought under control. Here, at a petrol bunk in New Delhi. A file photograph.

The agricultural loan waiver valued at Rs.60,000 crore announced in Budget 2008-09 has dominated discussions on the Budget.

The fact that the boom in growth has been consumption-induced, services-dominated and credit-fuelled has implications for its sustainability. WITH the release of the quick estimates of national income, which show that gross domestic product (GDP) growth in 2006-07 touched 9.6 per cent, the government can legitimately claim that the recent acceleration in growth is not a short-lived phenomenon. After taking into account the performance in 2006-07, GDP growth as estimated by the Central Statistical Organisation (CSO) averages 8.75 per cent during the four-year period from 2003-04 to 2006-07 compared with just 4.67 per cent during the first three years of this decade. And, if forecasts by the Reserve Bank of India (RBI) and other sources are an indication, the advance estimates for 2007-08 are unlikely to be below this level. Five years of near 9 per cent growth do point to a new growth story. Underlying this turnaround in growth is a sudden step-up in the rates of investment (and saving) in the economy. Compared with an average level of 24.6 per cent during the four years from 1999-2000 to 2002-03, the gross domestic investment rate rose to 28.2 per cent in 2003-04 and then continued to climb to touch 35.9 per cent in 2006-07