Character of Left parties - Ridiculous -On Indo-US Deal

Left Parties (CPM and associates) are playing a spoilsport in Indo - US Nuclear Deal. Which will benefit India's Power crises and can bring an end to power crises for whole country.
but Left parties are against indian interests and so they withdrew their support to UPA government as they are against Indo- US deals.

Actually Left parties are funny parties who don't know how to work for interests of the country. by seeing past of all the Comminists parties it is clear that they are always against any deal with United States of America and India, whatso ever be the motive of the deal.

I mean to say if there is a deal to take place between Indian Government and USA then Left parties would always be against them. Instead if the same type of deal is taking place between India and any other country(China or UK especially)then Left parties would have never opposed that deal under any circumstance.

In previous general elections Left parties provided support to Congress government to stop BJP from making a government at center and in 2008 they withdrew support from UPA government to stop them to finalize the INDO - US Nuclear Deal, they have no moral values and are surely not thinking in the interest of indian Subcontinent. If they have understood each and every aspect of this deal then there is no reason to act against this deal which would end Power crises in india and would enter India's name along with likes of US, UK, Russia, China etc which are developed Countries. So here the question arises

Are Left parties against Development of India as a country????

Looking at present scenario of indian politics and biased opinion of left parties on Indo US Nuclear deal the answer to above question is YES.

Left Parties have some bias on deals with Russia or UK instead of USA so they are opposing the deal without thinking about the results and the hindrance which failure of the deal would provide in growth of India as superpower which is a dream of Sardar Manmohan Singh.

What is Wealth Tax - Explained

Everyone having interest in Indian economy is fascinated by 'Wealth Tax' what it actually is??
so this post will sort every Ambiguity on this topic of wealth tax??

What is wealth tax?

Wealth tax is a tax levied on individuals, Hindu Undivided Families (HUFs) and companies who possess net wealth in excess of INR 1.5 million on March 31st of every year. The Wealth tax law specifies a list of assets that will be considered to be part of the taxable wealth of the assessee. Broadly, house property, motor cars, jewellery, cash in hand subject to limits, urban land, yachts, boats and aircrafts are the assets that will be liable to wealth-tax in India. Principally, wealth tax is levied on non-productive assets of assesses, and thus the above assets, where used for commercial purposes, will be excluded from taxation. The current rate of wealth tax is 1 percent on the net wealth of the assessee, exceeding the threshold limit of INR 1.5 million.

The value of taxable assets for the purpose of wealth tax would be their value as on the last day of the respective financial year (FY). Further, such value of assets (except cash) will have to be determined in accordance with the valuation norms laid down in the Wealth Tax Act. In determining the value of the assets, debts owed by the assessee in respect of assets chargeable to tax are reduced from the taxable value of the assets. Thus, where you have purchased your brand new Mercedes on 'easy monthly installments', the outstanding value of the loan as at March 31 of the FY will go on to reduce the value of the motor-car in the wealth tax computation. Further, while the tax base for wealth tax is restricted to individuals, HUFs and companies; their interest in partnership firms/ association of persons (AOP) to the extent such firms/ AOPs possess specified assets is included in their net wealth and subjected to tax.

Exemptions and clubbing provisions:

In determining the wealth tax liability, one must be careful in examining whether an asset is liable to wealth-tax, as there are some exemptions that are available with respect to certain prescribed assets. For example, wealth-tax need not be paid in respect of one house of an individual/ HUF or on a plot of land which does not exceed 500 square metres. Neither does tax need be paid on any residential property that is let out for a minimum of 300 days in the relevant previous year, nor on any property which is held for business purposes. Motor cars that are held by an assessee for running them on hire or held as stock in trade are also not liable to wealth-tax. The same applies to jewellery that is held as stock in trade for the purpose of business. Other than the specified assets prescribed under the wealth tax law, no other assets such as investment in fixed deposits, shares or intangible property is subject to wealth tax in India.

It is also important to note that one cannot evade wealth tax by transferring ownership of taxable assets among family members with a view to disperse the value of such assets which could subsequently reduce the tax burden. When an asset is transferred to a spouse or a minor child of the individual, or to any other person for the benefit of his spouse or minor child, without adequate consideration, even if the ownership of that asset does not lie with the individual, he will be liable to pay wealth-tax with respect to those assets. Thus, the diamonds that you gift your wife on your anniversary, besides burning a hole in your pocket, will cause you to pay wealth tax, as the jewellery is deemed to be your wealth.

Filing of returns

The Indian wealth tax law requires every person subject to wealth tax in India to file a physical wealth tax return with the Income-tax authorities by July 31 (September 30 for companies) of the year following the FY. Another factor to consider is that while Indian residents are liable to pay wealth tax on their global wealth i.e. on those assets situated outside India too, but non residents including foreign companies are liable to pay tax only on assets situated in India.

World's Strongest & Largest Economy list 2007-08

Finally Indian Economy managed to enter into league of World's trillion dollar economies .

According to the World Development Indicators released on July 1, India was a $1.17 trillion economy at the end of calendar 2007.

The US retained its pole position as the largest economy with GDP of $13.8 trillion. Following are names of the largest countries in terms of GDP.

The list of World's largest/strongest economies goes as shown below :
(Rank - Economy value in $)
1. - US
$13811.2 billion - 2007
$13163.9 billion - 2006

2. - JAPAN
$4376.7 billion - 2007
$4368.4 billion - 2006

3. - CHINA(People Republic of China)
$3297.2 billion -2007
$2896.9 billion -2006

4. - GERMANY
$3280.0 billion -2007
$2644.7 billion - 2006

5. - UK(United Kingdom)
$2727.8 billion - 2007
$2377.0 billion - 2006

6. - FRANCE
$2562.3 billion - 2007
$2248.1 billion - 2006

7. - ITALY
$2107.5 billion - 2007
$1851.0 billion - 2006

8. - SPAIN
$1429.2 billion - 2007
$1224.7 billion - 2006

9. - CANADA
$1326.4 billion - 2007
$1271.6 billion - 2006

10. - BRAZIL
$1314.2 billion - 2007
$1067.5 billion - 2006

11. - RUSSIA
$1291.0 billion - 2007
$987.0 billion - 2006

12. - INDIA
$1171.0 billion - 2007
$911.8 billion - 2006

Crude oil may touch $175 a barrel by Diwali: Experts

Skyrocketing crude oil prices are likely to continue the upward march and could reach 175 dollar a barrel by Diwali unless there is significant decline in demand from growing economies, analysts say.

Crude oil prices have risen by about 40 dollars since March. Currently on New York Mercantile Exchange, oil traded near record high levels around 142 dollars.

"Considering the current situation and pace of price rise, crude oil rates may go up to 175 dollars per barrel in the global market. Prices may get fresh triggers, if Israel attacks Iran this year which would affect Mideast supplies," Religare Commodities Head (Commodity Business) Jayant Manglik told reporters.

High volatility spurred by uncertain geo-political tensions, slumping US economy and spiralling demand across the world would continue to support the already high crude oil prices, he said.

If you look at the technical chart, prices have moved upwardly in the last six months and we expect the bullish trend to continue further in the coming months. Prices may go beyond 175 dollars per barrel and touch 200 dollars per barrel," Mumbai-based Kotak Commodities Services Technical Analyst Dharmesh Bhatia said.

Amid the rising crude oil prices, there seem to be no respite for India and other countries, which are reeling under high inflationary pressure.

"Oil demand is rising higher than the supply. Although it is difficult to predict how much prices would inch up but they may rally in the range of 140-150 dollars per barrel,"Industry body Federation of Indian Chambers of Commerce and Industry (FICCI) expert Anjan Roy said.

"Price rise is driving countries to look at alternative energy and conservation of energy. I think this would keep a check on a rise in additional demand for crude oil," Roy added.

According to experts, crude oil prices would decrease only when the demand falls significantly, which seems unlikely, or there is improvement in supply position. Currently, the global demand is approximately 87 million barrels a day against the supply of 82 million barrels a day.

"The prices will decline only when demand falls, of which there is no clear evidence so far. But when demand starts falling due to degrowth, prices will also decline and this will lead to a downward spiral with low prices and increased supply," Manglik said.

A similar scenario was witnessed in the late nineties when high crude prices punctured fast-growing South East Asian economies and led to a downward spiral, he said. Roy said the prices could be brought down only if the supply gap is addressed.

Govt taking steps to tame inflation - Finance Ministry

The federal government is taking steps to tame inflation that was mainly driven by high commodity prices, a finance ministry statement said on Tuesday.India's wholesale price index rose to 13-year high of 11.42 per cent in mid-June, after the government raised retail fuel prices by 10 per cent last month. "Though this is the highest inflation in the last 13 years, it is largely commodity centric. Government is taking measures to moderate the inflationary pressure," the statement said, without specifying.

Reeling out data, the ministry said around 60 per cent of the increase in the prices of primary articles was accounted for by five commodities - iron ore, cotton, milk, fish and oranges. Even in the manufacturing sector, nearly 60 per cent of the increase was accounted for by eight products, six of which belong to the category of iron and steel products.

Last month, the central bank raised its key lending rate twice, first by 25 basis points and again by 50 basis points, to rein in inflation

India slips in global business climate ranking

India has slipped 13 places to 64th rank in a global list that measured business climate in 121 countries, as inflation and differences between the government and its Left allies dampened investor confidence. India has dropped from 51st place, whereas China is two notches down from last year's ranking at 79 in the Forbes list of 'best countries to do business. The list is topped by Denmark, climbing three spots from the previous year, followed by Ireland and Finland.


"India and China fell in this year's ranking as political instability demonstrated resistance to increasing personal freedoms. Higher inflation from food and other commodity costs, as well as increased burdens on entrepreneurs also held the world's most populous nations back as business destinations," Forbes said in an accompanying report.

Denmark, which rose three slots from last year, Ireland (up 19 places to No 2), Finland (up four to third place), the US (down three to fourth) and UK (up five to fifth). Big movers like Ireland, Estonia (No 10, up 24 spots) and Saudi Arabia (No 47, up 37) have limited bureaucracy standing in the way of entrepreneurs hoping to do business there. However, the world's largest economy United States declined one spot to the fourth place, whereas another economic giant United Kingdom retained its fifth position.

Pointing out that the Indian government has reduced controls on foreign trade and investment, Forbes said tariff spikes in sensitive categories, including agriculture, and incremental progress on economic reforms still hinder foreign access to India's vast and growing market.

"Privatisation of government-owned industries remains stalled and continues to generate political debate; populist pressure from within the UPA government and from its Left Front allies continues to restrain needed initiatives," the report noted. Forbes said that strong growth combined with easy consumer credit and a real estate boom fuelled inflation concerns in 2006 and 2007. This had led to a series of central bank interest rate hikes that have slowed credit growth and eased inflation concerns.


"The huge and growing population is the fundamental social, economic, and environmental problem," it said. Forbes analysed the business climates of countries, focusing on degrees of personal freedoms such as freedom of expression and right to participate in free and fair elections. "Investor protection examines the recourse held by minority shareholders in cases of corporate misdeeds, while corruption looks at the number and frequency of similar misuse of corporate assets for personal gain. Together with economic policies supportive of free trade and low inflation, these key points form a snapshot of countries' suitability for capital investment," the magazine said.


Developed countries like Germany (21st rank) and France saw declines in their respective rankings due to scandals in the banking sector and tougher barriers for entrepreneurs. One of the biggest falls came from Japan, which dropped to 24th rank from 21st position. On Japan, the report said, "... a Council on Economic and Fiscal Policy spelled out problems with the world's second-largest economy earlier this year. Among others, the committee's report cites the nation's 40 per cent corporate tax rate as uncompetitive compared with regional rivals like Hong Kong at 17.5 per cent and South Korea at 25 per cent."

"India's Biggest challenge is inflation " - P.Chitambaram

Finance Minister P Chidambaram considers inflation the country's biggest challenge today and regards becoming an open market as the way forward. Expressing concern at "the relentless rise" of crude oil, commodity and food prices, he put partial blame for the rising food prices on the "foolish" diversion of food to fuel. But he did not name the US, where food crops like corn are used for making ethanol. "Food prices have also been on the rise thanks to foolish diversion of food to fuel," he said, appearing on an hour-long special about India's business and economy - "India Rising: The New Empire" - on CNBC Sunday night.

Chidambaram also did not think that recent acts of terrorist violence would affect the investment climate in India. "Please remember, terrorist violence has affected bigger cities like London, Madrid, Tokyo, New York," he told the show host Erin Burnett discussing India's economic challenges. "If terrorist violence, terrorist action affects any city in India, it concerns all of us but that does not mean that investment has been jeopardised or is in peril," Chidambaram said. "India's biggest challenge now is inflation." India is building thousands of kilometres of roads, power plants, refineries and sea ports, he said referring to investment in infrastructure. "But surely the way forward is to become an open market."

Commerce and Industry Minister Kamal Nath, too, viewed infrastructure as "also a big challenge for us to keep pace with our growth." Infrastructure is just not roads, ports and airports, but also rural roads, which connect villages, drinking water, health and access to medical facilities. Envisaging large investment in infrastructure over the next five years, he said: "It is happening. We have to have huge investments in energy sector, ports.

So that's all happening, that's on the anvil." Asked how long controls on foreign investment would stay, Kamal Nath noted that retail is one of the very few sectors which are not open. "Rest are all absolutely open and we are taking in investments." Obviously because of liberalisation, foreign direct investment (FDI) had grown from $2.2 billion four years ago to 25 billion this year, he said. Asked if India could remain self-sufficient in food in view of its growing population, Kamal Nath said: "We have been self-sufficient except in edible oil and lentils, which are imported. And unless we have a monsoon failure, we don't see a problem even with these growing numbers."

Comparing India and China, the minister said: "We call ourselves the fastest growing free market economy. And there are differences in governance too." And while India's growth story is domestic market-driven, China's growth story is export market-driven. "But China has its own genius, we have our own genius," Kamal Nath said noting the two countries have good relations even as they compete with each other. Besides India's growth story, the CNBC special also featured a look at Tata Motors and the world's cheapest car, Indian movies, the world of call centres and Burnett practicing cricket with a team in India.

The programme also took a look at India's growing upper class, including the 60-storey house being built in Mumbai by the country's wealthiest man, Mukesh Ambani. And in stark contrast, it also took a quick glance at millions of India's homeless and others living in the world's biggest slum at Dharavi.

- Economic times

Inflation to hit Indian Inc's growth plans - report

The 13-year-record inflation figures were announced on a day when Hindalco Industries announced its plan to retire loans taken to finance the Novelis acquisition. The Aditya Birla flagship company, which has about $3.03 billion as debt because of a bridge loan taken to fund the acquisition, will be tapping the market soon to meet the bridge payout.

“As long as we can pass on the cost to the market, it is ok,” managing director Debu Bhattacharya told reporters on Friday. “If we can’t, then it will be bad.” Inflation rate surged to a 13-year-high due to high crude and commodity prices, putting a question mark on growth estimates and on the ability of the Indian market to absorb any further increase in input costs.

“It’s (inflation) very unfortunate and certainly a thing that we can do without,” said Tata Sons’ finance director Ishaat Hussain. “But it has been driven by high oil and commodity prices, largely on account of external factors. It will require measures which will impact growth. Borrowing will become costlier and growth momentum will be affected.”

Indian companies, large and small, have drawn up large plans to expand capacities. Since borrowing will become costlier, the future of such expansion plans looks uncertain. However, the infrastructure sector may not be affected as deferring such projects would be even costlier.
India is scheduled to spend $500 billion to develop various infrastructure projects. B Hariharan, group finance director of the Gautam Thapar-controlled Ballarpur Industries, says “The high inflation will slow down the manufacturing sector. Although expansion projects will be affected, those that will be funded by domestic debt will be hard hit, while companies depending on foreign loans may be relatively better off,” he added.

On Thursday, KPMG said India would likely see the largest global investment in the manufacturing sector, with about 25% of large global corporates expected to invest in the country. Investment in other sectors such as in industrial products, will also be large, with India likely to displace the US to gain the second rank after China, said the report, which was based on a survey of 300 corporate investment strategists from 15 economies

Direct Tax collection up 71% then previous year

India's direct tax collections continued to grow at a robust pace to log a 71.28 percent rise in the first two months of this fiscal at Rs.228.4 billion ($5.7 million), against Rs.133.35 billion in the like two months of the previous fiscal.

The growth in personal income tax was the highest with 73.05 percent at Rs.146.9 billion, against Rs.84.89 billion, while the corporate tax mop-up was higher by 68 percent at Rs.81.26 billion against Rs.48.35 billion. "Direct tax collections have been witnessing a high growth due to better tax compliance by the taxpayers and an improved tax administration," a statement issued by the finance ministry said Wednesday.

Finance Minister P. Chidambaram said last week that the Central Board of Direct Taxes (CBDT) would meet soon to revise upward the official estimate on direct taxes for this fiscal, set at Rs.3,650 billion. "For 2007-08, direct tax collection was Rs.3,144.68 billion. This represents an increase of 36.62 percent over the previous fiscal, and 117.56 percent of the original budget estimates," he said. "In four years, this has been tripled - that is from Rs.1,050.88 billion to Rs.3,144.68 billion.

This is a remarkable achievement and I compliment the department for this extraordinary achievement," he added. "The cost of collection has come down to 0.54 percent. For every Rs.100 collected, the department spends only 54 paise. Now, this is the lowest in any jurisdiction in the world."

India second in consumer confidence index

Despite a marginal slowdown in growth, India still ranks second after Norway in consumer confidence and their attitude towards recession, says a survey by a global information and media consultancy. "One market's trash is another's treasure, Norway and India still ride the wave of economic slowdown," says the Nielsen Global Online Consumer Survey conducted among 28,153 Internet users in 51 markets in Europe, Asia Pacific, the Americas and the Middle East.

Aside from consistently high consumer confidence, the two most optimistic nations in the world, Norway and India, share something in common: Their economies are benefiting from the by-products of economic slowdown. The survey says India will see its employment rate rise in inverse proportion to rich nations, thanks to the country's enthusiastic adoption of work-force optimisation practices and the outsourcing bug.

India has established itself as a hub for outsourcing technical and support staff, as belts in the world's leading economies tighten. We may well see India's economy, and the confidence of its consumers, soar. The Nielson survey says 94 percent of Norwegians and 86 percent of Indians were optimistic about their job prospects over the next year, while a staggering 93 percent Portuguese and 89 percent Japanese felt their job prospects were either not so good or downright bad.

The survey says consumers in three of the world's most developed economies - the US, Japan and New Zealand, have taken a serious turn in the last few months. Not surprisingly, consumer confidence has fared badly in the US, the world's largest economy and epicentre of the sub-prime housing and credit crises. The survey says consumer confidence fell in 39 out of 48 countries, with New Zealand, the US and Latvia suffering the deepest declines. "No region or country has been spared the domino effect of the US sub-prime and credit crisis", observed David Parma, global head of customized research for The Nielsen Company.

"The last six months have been the most turbulent period for the global economy in several decades. When the USA sneezed at the outset of the sub prime disaster nearly a year ago, the rest of the world quickly caught a cold," he said. "Consumers around the world are struggling with the same global issues that are impacting their daily lives. It's an unfortunate pendulum." Parma said on the one hand the world was witness to soaring global crude oil and commodity prices and rising interest rates, while on the other there was a fall in property prices, weakening labour markets and falling industrial output.

India not a trade friendly nation - World Economic Forum

Hong Kong and Singapore are the two economies most conducive to global trade, according to a ranking by the World Economic Forum released on Wednesday. The World Economic Forum's new Global Enabling Trade Index survey of 118 economies looked at ten factors impacting trade, such as tariffs, customs administration efficiency and availability of transport and communications infrastructure.

The forum ranked Hong Kong number one thanks to its "very open market" as well as a "secure and open business environment." Singapore's open business environment was also complemented by a "highly efficient and transparent border administration" and a well-developed transport and communications infrastructure.

Third and fourth places were taken by Sweden and Norway respectively, while Canada was ranked fifth. The world's largest economy United States, however, did not figure in the top ten, coming in at number 14, dragged down by its border administration, judged to be "lacking some efficiency." "Customs procedures (in the United States) are seen as comparatively burdensome (ranked 42nd) and there is a relatively high cost to import (ranked 65th)," said the WEF.

Export giant China fared even worse, ranked just 48th, reflecting "underlying weaknesses in its economy and its trading regime." "Above all, China is a fairly closed country. Although its economic success relies heavily on exports, imports are still severely inhibited by tariff and non-tariff barriers, despite the country's accession to the WTO," it said. Fellow Asian giant India ranked even further down the list, at 71st place, due to its market access, which is rated as "severely restricted." Brazil was not far behind India, at 80th place, as its markets remain "fairly closed, with tariffs... inhibiting goods imports."

Finance Minister : Banks to waive farm loans by 30th june

Union Finance Minister P. Chidambaram Monday said state-run banks would waive farm loans by June 30, as outlined in his budget speech Feb 29.

"Yes, they (banks) will implement the farm loan waiver scheme by this month-end. The process is on. The scheme is under implementation by the public sector, regional rural and cooperative banks. The beneficiaries have been identified," Chidambaram told IANS on the sidelines of a bank event here.

In his budget speech, the finance minister had set June 30 as the deadline for waiving bank loans to small and marginal farmers with holdings up to three hectares. The size of the loan waiver scheme was increased in May to Rs.716.8 billion from the Rs.600 billion set initially, as the number of beneficiaries has been estimated to be about 40 million.

The waiver will enable the beneficiary farmers to become eligible for fresh institutional credit for the kharif crop.
Chidambaram Monday visited two Canara Bank and Vijaya Bank branches, as well as a rural bank branch on the outskirts of the city to interact with agricultural borrowers and supervise the debt relief scheme to farmers.

June 13 - Inflation soars to 8.75% on rising prices

Surging food and fuel prices further pushed up inflation to 8.75 per cent for the week ended May 31 from 8.24 per cent in the previous week, its highest in 7 years. Inflation may go beyond a 13-year high of 9 per cent as a result of the steepest-ever hike in petroleum prices, analysts said. "It (inflation) could cross 9 per cent in the near term owing to the hike in petrol and diesel prices," HDFC Bank chief economist Abheek Barua told reporters recently.

In a bid to curb inflation, the Reserve Bank India on Wednesday hiked the repo rate — the rate at which banks borrow from RBI — by a quarter point, from 7.75 per cent to 8 per cent, giving a clear signal that for it inflation is a bigger priority than growth. It may not tame inflation in a hurry, but will discourage spending over a period of time, as banks pass on their higher cost of funds to borrowers. But all is not over yet.

For, a slim majority of economists now expect the RBI to raise its key lending rate once more in 2008 after this week’ssurprise 25 basis point increase to contain inflation expectations, a media poll has showed. Many also expect the RBI to raise its cash reserve ratio (CRR), the main policy instrument used over the past 18 months, by 25 to 100 basis points in coming months to clamp down on inflation-stoking surplus cash.

The government, under pressure to contain prices ahead of state polls this year and national elections due by next year, has also cut import duties on edible oil, curbed rice exports and forced steel and cement companies to cut prices.

US has vital stake in India's rise as a global power

Describing India as an emerging "global power" and an "ally," US Secretary of State Condoleezza Rice says Washington has a "vital" stake in New Delhi's rise.

"India stands on the front lines of globalisation. This democratic nation promises to become a global power and an ally in shaping an international order rooted in freedom and the rule of law," Rice says after noting that Indo-US relations have experienced a "dramatic breakthrough" during the eight years of Bush Administration.

"...the United States has a vital stake in India's rise to global power and prosperity, and relations between the two countries have never been stronger or broader," Rice says in an article in the latest issue of Foreign Affairs magazine published by Council on Foreign Relations, a Washington think-tank.

"It will take continued work, but this is a dramatic breakthrough for both our strategic interests and our values," she says.

Penning her thoughts on foreign policy pursued by the George W Bush administration during the last eight years, Rice says Washington has placed importance to building strong relations with existing global players as well as emerging.

With those, particularly India and Brazil, the United States has built deeper and broader ties, she says.

On Brazil, she says the country's success at using democracy and markets to address centuries of pernicious social inequality has global resonance.

"Today, India and Brazil look outward as never before, secure in their ability to compete and succeed in the global economy.

"In both countries, national interests are being redefined as Indians and Brazilians realise their direct stake in a democratic, secure, and open international order -- and their commensurate responsibilities for strengthening it and defending it against the major transnational challenges of our era," Rice says.

The terror attacks on the US on September 11, 2001 was similar to the attack on Pearl Harbour in 1941, which fundamentally changed the world, she says.

"We were called to lead with a new urgency and with a new perspective on what constituted threats and what might emerge as opportunities. And as with previous strategic shocks, one can cite elements of both continuity and change in our foreign policy since the attacks of September 11."

"What has not changed is that our relations with traditional and emerging great powers still matter to the successful conduct of policy. Thus, my admonition in 2000 that we should seek to get right the "relationships with the big powers" -- Russia, China, and emerging powers such as India and Brazil -- has consistently guided us," Rice says.

Washington's alliances in the Americas, Europe, and Asia remain the pillars of the international order, she says, adding that the Bush administration was now transforming them to meet the challenges of a new era.

"In this strategic environment, it is vital to our national security that states be willing and able to meet the full range of their sovereign responsibilities, both beyond their borders and within them. This new reality has led us to some significant changes in our policy.

"We recognise that democratic state building is now an urgent component of our national interest," she said adding that in the broader Middle East, the US recognises that freedom and democracy are the only ideas that can, over time, lead to just and lasting stability, especially in Afghanistan and Iraq.

India's Fiscal Deficit Higest in World - still increasing

India is one of the fastest growing economies in the world. The foreign exchange reserves reach a new high every week (($314 billion), inflation has not been controlled due to hike in the price of crude oil (nearly $135) and interest rates continue to be low. Indian fiscal deficit is the highest in percentage among the other countries of the world.

What is fiscal deficit?

Fiscal deficit is essentially the difference between what the government spends and what it earns. It is expressed as a percentage of GDP.

India's fiscal deficit was brought down to 3.17% (Rs 1,43,653 crore) of the gross domestic product in 2007-08 from 3.8% in 2006-07. The government has promised to cut the deficit further to 2.5% of GDP (Rs 1,33,287 crore) by the end of 2008-09, but looking at the way things are going, economists say, it is unlikely the government will meet its target

India's fiscal deficit continues to be among the highest in the world and underlying pressures are not entirely showing up in headline fiscal numbers, Reserve Bank of India Governor Y. V. Reddy said.

Earlier in the Budget 2008 - 09 document, the government's revenue expectations are realistic, but expenditure appears to be underestimated. This may be because expenditure to the tune of 2.0-2.5 per cent of GDP remains off budget. There is no provision in the budget for the loan waiver of $16.8 billion to the farmers (earlier Rs.60,000 crores and now it is increased to Rs.71,680 crores) and huge amount of $6.36 billion arrears to the Central Government employees (Rs.27145 crores for the Central sixth pay commission recommendations), which is expected to 1.85 per cent of the official GDP for 2008-09. The loan waiver scheme will benefit 3.69 crore small and marginal farmers and 59.75 lakh other farmers. This is the vote bank for the next 2009 general elections to the Congress Party.

The budget 2008 - 09 document also says that the Plan expenditure is going to rise by around Rs 38,000 crores or around 19 per cent. Non-plan expenditure will rise by a much smaller amount, by Rs 64,806 crore or 17 per cent. The actual figure may be much higher.

The fiscal deficit for 2008-09 is forecast at 2.5 per cent of GDP, lower than the deficit for 2007-08 of 3.1 per cent of GDP for 2007-08, and also lower than the 3 per cent of GDP mandated by the Fiscal Responsibility and Budget Management (FRBM) Act. It is highly unlikely that the government will achieve its forecast.

While net borrowings for 2008-09 have been budgeted at Rs 1 trillion and the gross borrowing estimate is at Rs 1.45 trillion. Critically, it does not include oil bond redemptions of Rs 13000 crores. It remains to be seen how the government finances maturing oil bonds. Therefore there appears to be a considerable upside risk to market borrowings for 2008-09. Though aimed populist in nature, many of the announcements made could fuel inflation and put pressure on the fiscal deficit in 2008-09.

Economists point out that all oil bonds and a part of fertiliser bonds are not accounted for in the Budget. This means that the government does not have to include these expenses while calculating the surplus or deficit for the year.

Subir Gokarn, Asia Pacific economist at rating agency Standard & Poor's, says that oil bonds are just liabilities and not real expenditure for the government and hence, technically, they cannot be added to the fiscal deficit.

Tax collections were at a record Rs 5,88,000 core in 2007-08 helped by robust economic growth and corporate profitability. However, with growth likely to slow down in 2008-09, it remains to be seen whether the same buoyancy will be maintained.

Also, not every expert believes fiscal deficit is worrisome. Dr Ashima Goyal, professor at Indira Gandhi Institute of Development Research, believes a high fiscal deficit is an indication that the government is spending more on "productive expenditures."

"We are seeing the centre's fiscal situation is improving but I think there are several underlying fiscal pressures not entirely evident in the numbers," Reddy told a conference in New Delhi on 26 May 2008.

India aims to bring down its fiscal deficit to 2.5 percent of GDP for the 2008-09 financial year, compared to 3.1 percent in 2007-08, but financial analysts fear a $17 billion scheme to write off the debts of millions of small farmers and tax cuts could trip up efforts. According to the Fiscal Responsibility and the Budget Management Act operationalised in 2004-05, the government must reduce its fiscal deficit to 3 pct of GDP and wipe out its revenue deficit by 2008-09.

But it has already missed its revenue deficit target and expects it to be 1 percent of GDP in the year to end March 2009. Reddy said the fiscal deficit as a percentage of gross domestic product continues to be among the highest in the world.

Market borrowings finance more than half of the gross fiscal deficit and the rest of the gap is filled by small savings, provident funds, reserve funds and deposits and advances.

The gross fiscal deficit covering both state and central government is estimated at 5.5 percent in 2007-08, according to official estimates, down from 9.5 percent in 2002-03.

Fiscal deficit will be more in the coming months due to oil prices. Crude oil price of $35 per barrel in BJP government has been increased to $135 in Congress government which is nearly $100 difference per barrel. Congress Government is searching many options to recover the loss of PSUs and trying to reduce other taxes and duties. Increase of each one dollar hike in crude oil will give huge loss of Rs.3000 crore to Public Sector Undertakings. Central Government has no option except to increase the prices of petrol, diesel and gas for recovering some extent of losses