The Hindu Business Line : Abetting greater investment

The massive investment in infrastructure will make India a preferred-investment destination. The importance given to higher education and the establishment of a world-class university at Bangalore will provide long-term competitiveness for India as a knowledge power.

THE Budget presented by Finance Minister, Mr P. Chidambaram, aims at continuing the accelerated growth of the economy and providing social justice.

Due focus is given to rural areas which account for a majority of the population while equal emphasis has been given to building up urban infrastructure.

By simplifying the tax system and reducing the slabs, individual tax payers are given significant reduction in tax outgo. Corporates are also benefited by the reduced corporate income tax.

Thus, there will be more disposable income in the hands of both individuals and the corporates.

This will improve investment climate as more savings are generated for further investment.

Capacities built up in the 1990s are expected to be exhausted. With the reduction in customs duties for capital goods and availability of adequate foreign exchange reserves, we may see substantial investment taking place to increase capacities and to modernise Indian industry.

The continuation of the TUF Scheme for textiles and the massive investment envisaged in this sector will enable India to cash in on the opportunities provided by the dismantling of the quota system under WTO.

The new delivery system for rural credit through micro-finance institutions will help the banking system to improve its reach and provide it the flexibility to compete effectively with the village money lender.

The continued emphasis on agriculture will give the Indian farmer greater purchasing power. This will augur well for the corporate sector as there will be increased demand for the goods and services produced.

Banks will be allowed to issue preference capital and this will help them to mobilise additional capital, particularly in the context of the implementation of Basel-II. A number of public sector banks may reach the statutory ceiling of 51 per cent Government holding very soon and the facility to issue preference shares will enable them to raise capital without affecting the ownership complexion. Preference shares to be issued by banks also provide an opportunity to those who look for regular income from investments.

The massive investment in infrastructure will make India a preferred-investment destination.

The importance given to higher education and the establishment of a world-class university at Bangalore will provide long term competitiveness for India as a knowledge power.

(The author is Chairman & Managing Director Union Bank of India Mumbai.)

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