Taking forward their political mandate of inclusive growth, the UPA government has delivered a fairly growth-oriented budget on Monday for 2009-10. The key highlight has been a focus on leading the economy back to the GDP growth rate of 9 per cent and implementation of reforms through better implementation and governance.
An increased allocation for the railways, rural electrification, acceleration of power projects, national highways and a blue print for gas distribution are all reflective of the administration’s intent to bridge the gap between urban and rural India and provide a growth stimulus to the economy.
Infrastructure is the lever through which the government has been expected to drive its reform agenda. On this count, the Finance Minister has outlined a progressive framework by sharing a clear mandate for infrastructure financing through the India Infrastructure Finance Company Limited.
If the government indeed brings alive the emphasis on removing policy, regulatory and institutional bottlenecks for speedy implementation of infrastructure projects, it would be a positive move.
Growth of physical infrastructure in India such as energy, roads and railways is going to be important since it will directly drive employment, increase purchasing power and hence impact overall demand. Further, the incentives in R&D will help raise the bar in local manufacturing.
Also noteworthy is the government’s recognition of the challenges posed by global warming and climate change and hence the significance of enhancing the contribution of clean energies such as wind, power and natural gas.
The one segment key for India’s overall growth agenda that did not resonate prominently enough in the budget was healthcare. The Indian healthcare industry is in transition and needs substantial investment to build new models of healthcare systems, lower costs, improve accessibility and improve quality.
The sector should be made a ‘Priority Sector’ in the future. The impact of the fiscal deficit, and the government borrowing programme will mean that inflation, and interest rates will need to be monitored closely.