'Focus on infrastructure should be strengthened further'

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By DR Dogra, MD and CEO, CARE (Credit Analysis and Research) Ltd.

The focus in infrastructure should not only continue but also be strengthened in the budget 210-2011. The Eleventh plan had projected about 500 billion USD investment in Infrastructure between 2007 and 2012. Given the actual investment so far, a significant ramp up would be required in this area. Among many policies granting SLR status to all infrastructure instruments and further fiscal incentives could be some areas of focus.

We would expect the budget to start the process back to fiscal consolidation. Combined Centre-States fiscal deficit is already estimated at around 11.8% of GDP in FY10 which is significantly high. So some rationalizing of public expenditure, including consolidation of flagship development intervention programmers', rationalizing of subsidies, better targeting of expenditure, among others. Given the nascent and uneven nature of recovery, the time may not be ripe to withdraw all tax incentives immediately. A viable plan for divestment of stake in Public Sector entities would hence assume crucial importance. 

Managing the economic recovery would be the biggest issue. We have supply side inflation along with a nascent yet uneven recovery in demand. On the other hand are the expenditure commitments of the Government towards flagship social development programmes. How the finance minister negotiates through the various policy constraints that these various facets have brought with them will be closely watched.

Personally, I would expect Finance Minister to build on his announcements regarding transition to a nutrient based subsidy system for fertilizers, divestment and re-structuring the administered price system in petroleum products along with indicating a movement towards reining in the fiscal deficit. Also given the possible delay in the implementation of the Goods and Service Tax (GST) from the April 1st deadline, greater clarity on the structure and timeline for implementation of the same would be something we would like to hear.