There is no quick solution to India’s challenges and, as Finance Minister Pranab Mukherjee said, one budget would not do it. Consequently, the new government has focused on sustained growth while defending the economy against the global crisis, albeit at the cost of fiscal consolidation.
The Budget focuses on broader, deeper and more inclusive growth. The continued emphasis on social sector investments and infrastructure are urgently needed to develop rural India. Rural India represents a vast and largely untapped resource. Developing the employability of this segment through spending on health, education and job creation opens up that large market for goods and services.
Infrastructure development is critical as it allows for mobility of people, goods and services between rural and urban markets. The government has underpinned its commitment to developing infrastructure by increased spends, more power to IIFCL, and a strongly-stated commitment to enhance infrastructure investment to over 9 per cent of GDP by 2014.
While financial markets could have wished for more liberalisation in rules governing foreign direct investment, my belief is the government may be waiting for a more appropriate time for taking such moves. With banking, for instance, the authorities have indicated that now is not the right time. In any case, the government has done a lot in terms of opening up the economy to global investments. What could help is better governance, which will make it easier and cheaper to do business in India , thus maximising benefits from the liberalization the country has already undertaken.
Neeraj Swaroop, Regional CEO, India & South Asia, Standard Chartered Bank
