For the union budget 2011, the FM will have to balance the twin imperatives of encouragingdomestic demand and stimulating growth, whilst keeping the fiscal deficit and inflation undercontrol.A prerequisite for domestic growth is channeling investments into Indian infrastructure, includinghealthcare and education. This would require increasing the availability and reducing the cost oflong term funding through dedicated infrastructure debt funds, fiscal incentives such as taxexemption of interest income from infrastructure bonds, and encouraging PPP models toimprove on-ground project execution. Improved infrastructure would lower the cost of doingbusiness in India, and provide multiplier benefits for the economy.
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For the union budget 2011, the FM will have to balance the twin imperatives of encouraging
ReplyDeletedomestic demand and stimulating growth, whilst keeping the fiscal deficit and inflation under
control.
A prerequisite for domestic growth is channeling investments into Indian infrastructure, including
healthcare and education. This would require increasing the availability and reducing the cost of
long term funding through dedicated infrastructure debt funds, fiscal incentives such as tax
exemption of interest income from infrastructure bonds, and encouraging PPP models to
improve on-ground project execution. Improved infrastructure would lower the cost of doing
business in India, and provide multiplier benefits for the economy.
The FM would also do well to address the burning issue of food inflation through coordinated
measures such as easing supply chain bottlenecks by opening up more procurement and
distribution centers for food grains, and increasing investments in agri-infrastructure to enhance
overall farm sector productivity and output.
To further reduce the fiscal deficit from the current 5.5% of GDP, government should strive to
enhance tax revenues by incentivizing employment generation in the organized sector and
redefining income tax slabs. This could bring in more people into the tax net and augment
excise and service tax collections due to increased consumption. Additionally, innovative
divestments such as the 3G auction and the Coal India IPO, show that if these exercises are
conducted systematically and transparently, the government’s revenue receipts could exceed
the target of Rs 40,000 crore for this fiscal.
Finally, the FM must enable the Indian private equity and venture capital industry by providing a
predictable tax and regulatory framework for investing in Indian companies. This industry has
come of age in India, and with a supportive environment can continue to play a key role in
promoting entrepreneurship and innovation, and making Indian companies globally competitive.