The Hindu Business Line : Poor infrastructure is India’s Achilles heel

Given the limited revenue openings for the Government, an ambitious Budget with a steep fiscal deficit may lead to sizeable borrowings, thus crowding out the credit requirements of the private sector, and making capital dearer. Alternatively, a fiscally prudent Budget may be constrained in stimulating the demand in the economy.

To circumvent this situation, generating money though divestment of public sector units seems to be a critical choice in determining the effectiveness of the Budget. Remember, the market cap of 66 listed PSUs aggregate to around Rs 12,47,291 crore. And yet, there remains a vast trove of more than 220 PSUs that still remain outside the pale of the equity market.

Education sector

One of the areas where budgetary expenditure can deliver long-term returns while also energising the demand is education. Given the vast human potential endowment, it becomes imperative that this resource is adequately developed for wholesome and assimilative growth. Another focus area is infrastructure. Poor infrastructure has long been seen as India’s ‘Achilles heel’.

This situation requires unprecedented response. India requires nearly $100 billion every year for five years to achieve a sustainable growth of above nine per cent. The Budget should seek to achieve this by enhancing the Public-Private Partnership model and by assisting in bankability of projects. Relaxation in ECB and FDI norms too would be crucial to augment investments in infrastructure.

On the policy initiatives front, the Budget may seek to balance the structural incongruities in the tax regime, and bring about a uniform taxation system. In this aspect the implementation of the Goods and Services Tax will not only eliminate the myriad of overlapping tax structures, but will also simplify the process. This will also bring about an economic integration of the various provincial markets in India; and make India a singular economic unit.

Banking reforms

On the banking side, the Reddy Committee report of 2004 should be reconsidered to align the administered interest rates with the prevailing yield curve. This would remove an implicit interest subsidy that exists in the small savings market, and lead to a reduction in the cost of borrowing for the Government.

Amongst other possibilities, the Budget could accord the equity FoF schemes the taxation status of equities, which has been a long-standing demand of the industry.

There is a clear need for a unique identification number (UIN) for Indian citizens. This may prove to be a common marker for state-security purpose, social identification and for financial and commercial purposes.

This would also address the Know Your Customer requirements on various financial transactions. The PAN system in this backdrop can be expanded to fulfil the objective.

I hope this Budget represents the values and aspirations of the people; and taps on the opportunities which the present cusp of events provide.

Sandesh Kirkire,

CEO, Kotak AMC

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