Thanks to the unexpectedly positive election results markets have built in rather high expectations from this years budget. Perhaps justified on the presumption that many of the economic proposals over the last five years have stalled because of the composition of the last government. However this budget needs to be seen in the backdrop of the current global downturn. India along with China have been able to show a lot more resilience as compared to the developed world.  The challenge is to take our growth rate even higher on the assumption that global growth rates will continue to remain anemic for the next couple of years.

For that to happen the focus of the government has to be on improving transparency and improved execution. I think the projects are already there. They just need to be implemented and the government has to ensure quick completion. Some steps in this direction have already been taken by allocating key ministries to "can do" ministers. Improved infrastructure adds to growth but at the same improves overall efficiency and operating leverage at an economy level begins to kick in.

This budget is important from a contextual perspective because it will be seen as the first policy document from the new government and will perhaps outline the road map for the next five years.

Specifically we would like to see specific proposals to bring down the fiscal deficit in the medium term and bringing down subsidies and more importantly improving the targeting of these subsidies also in the medium term.

We would like to see the announcement of an implementation schedule in which the government will share with its people the status of the major projects highlighting delays in implementation and cost overruns.

As far as the mutual fund industry is concerned we would like to see the tax anomaly of the fund of funds structure corrected. We would like to see the retailisation of the fiscal deficit by providing tax breaks for gilt funds. There is a chronic need for long term infrastructure funding. Mutual funds could be allowed to launch infrastructure debt funds with a 5 year lock in.

by Rajiv Anand, Managing Director & CEO, Axis Asset Management Ltd

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